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TRANSFER TAXATION
Transfer Taxes
those imposed upon the gratuitous disposition of
private property
Under our law, they are taxes levied on the
transmission of private properties from a prior
decedent to his heirs in the case of estate tax, or from
a donor to a donee in the case of donors tax.
Kinds of Transfer Taxes
1 !ea"# $ Es"a"e "axes
- those levied on the gratuitous transfers of property upon
ones death, formerly comprised of the estate and inheritance
taxes: Both taxes are now integrated into one estate tax.
2 %if" Taxes
- Are imposed on the gratuitous transfers of property during
ones lifetime, formerly comprised of the donors and donees
gift taxes !oth taxes are now integrated into a donors tax.
I !EAT& $ ESTATE TAX
Es"a"e "ax
graduated tax imposed on the privilege of the
decedent to transmit property at death and is !ase on
the entire net estate, regardless of the num!er heirs
and relations to the decedent.
a "transfer# tax not a property tax.
tax on the right to transmit property at death and on
certain transfers which are made !y the statute the
e$uivalent of testamentary dispositions.
Na"'re of Es"a"e Tax
%t is not a direct tax on property nor is it a capitation
tax, that is, the tax is laid neither on the property, nor
on the transferee or transferor, !ut on the right of the
decedent to transmit his estate.
%t is not a property tax !ut an excise tax.
('r)ose and *'s"ifi+a"ion of es"a"e "ax,
&he following theories have !een advanced to 'ustify death
taxation: (B)A*+
a- Benefi"-Re+ei.ed T#eor/
,or the performance of services rendered !y the
government in the distri!ution of the estate of the
decedent and other !enefits that accrue to the estate
and the heirs, the state collects the tax.
0- Redis"ri0'"ion of 1ea2"# T#eor/
-state tax is a contri!uting factor to the ine$ualities
in wealth and income. &he imposition of death tax
reduces the property received !y the successor
!ringing a!out a more e$uita!le distri!ution of
wealth in society.
+- A0i2i"/ "o )a/ "#eor/
&he receipt of inheritance places assets in the hands
of the heirs and !eneficiaries there!y creating an
a!ility to pay the tax and thus, a!ility to contri!ute to
governmental income and
d- (ri.i2e3e "#eor/ or S"a"e (ar"ners#i) "#eor/
%nheritance is not a right !ut a privilege granted !y
the state and large estates have !een ac$uired only
with the protection of the state. &he .tate, as a
"passive and silent partner# in the accumulation of
property has the right to collect the share which is
properly due to it.

In+iden+e or 0'rden of es"a"e of "ax
&hree views on who is the taxpayer in estate taxation:
1. *)-/-0-..1) 2 the o!'ect of the tax is the
property which has !een held or accumulated !y the
deceased and the tax has fallen upon him in the sense
it has affected the amount of the property which he
could dispose.
3. .U00-..1) 2 the tax is not paid !y the predecessor
who has no lia!ility till he dies and who is free to
ignore the duty if he wishes, while the successor
comes into less than he would have, and has no 4ind
of redress.
5. 6o *ersonal %ncidence - the estate tax has no personal
incidence at all, merely falling upon the estate as
such.
4a5 a))2i+a02e
-state taxation is governed !y the statute in force at
the time of the death of the decedent.
Re+i)ro+i"/
&here is reciprocity if the foreign country of which
the decedent was a citi7en or resident at the time of his death:
1.+ /id not impose an estate tax or
3.+ Allowed a similar exemption from estate tax with respect
to intangi!le personal property owned !y ,ilipino citi7ens
residing in that foreign country.
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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REVIEW NOTES FOR TAXATION 2 3
No"e:
1. )eciprocity applies only when:
a.+ &he property is an intangi!le and
!.+ &he decedent is a nonresident alien
3. &he following intangi!les are deemed located in the
*hilippines: (an exception to the principle of Res Mobilia
Sequuntur Personam and Situs of Taxation+
a.+ ,ranchises which must !e exercised in the *hilippines
!.+ .hares, o!ligations or !onds issued !y any corporation or
sociedad anonima organi7ed or constituted in the
*hilippines in accordance with its laws
c.+ .hares, o!ligations or !onds issued !y any foreign
corporation 89: of the !usiness of which is located in the
*hilippines
d.+ .hares, o!ligations or !onds issued !y any foreign
corporation if such shares o!ligations or !onds have
ac$uired a !usiness situs in the *hilippines and
e.+ .hares or rights in any partnership, !usiness, or industry
esta!lished in the *hilippines.
%ROSS ESTATE
the total value of all property, whether real or
personal, tangi!le or intangi!le !elonging to the
decedent at the time of his death, situated within or
outside the *hilippines, where such decedent was a
resident or citi7en of the *hilippines.
%n the case of a nonresident alien decedent, it shall
include only property situated in the *hilippines.

(ro)er"/ In+2'ded in "#e %ross Es"a"e 6INC47SIONS-,
A. In case of resident citizens, nonresident citizens and
resident aliens:
1. )eal *roperty within and without the *hilippines
3. &angi!le personal property within and without the
*hilippines and
5. %ntangi!le personal property within and without the
*hilippines.
B. In cases of nonresident aliens
1. )eal property within the *hilippines
3. &angi!le personal property within the *hilippines and
5. %ntangi!le personal property within the *hilippines, unless
there is reciprocity in which case, it is not taxa!le.
No"e, &hese are either:
A+ *roperties actually owned at the time of death
B+ *roperties deemed !y law to !e owned !y the decedent
under .ec. 89
In"er 8i.os Transfers S'0*e+" "o Es"a"e Tax
&he gross estate extends to gratuitous transfers made
!y the decedent during his lifetime which are treated !y
the law as su!stitutes for testamentary dispositions. &hey
are transfers inter vivos in form !ut mortis causa in
su!stance.
Ra"iona2e for "axa0i2i"/:
&o reach such transfers which are really su!stitutes
for testamentary dispositions and thus prevent the evasion
of the estate tax.
&hese transfers are:
a.+ transfers in contemplation of death (sec.89 !+
!.+ transfers with retention or reservation of certain
rights (sec.89 !+
c.+ revoca!le transfers (sec.89 c+
d.+ transfers of property arising under a general power
of appointment ( sec.89 d+ and
e.+ transfers for insufficient consideration (sec.89 g+
No"e,
&ransfers !y virtue of a !ona fide sale of property for
an ade$uate and full consideration in money or moneys
worth are excluded and not taxa!le.
INC47SIONS IN T&E %ROSS ESTATE 6CR
2
I% !I(+
1- !e+eden"9s in"eres" a" a s)e+ifi+ )ro)er"/
- &o the extent of the interest therein of the decedent at the
time of his death. (.ec. 89 A+
- -x: partnership interest, dividends
2- Transfer in +on"e:)2a"ion of dea"#
- A transfer with the thought of death.
- &he term "in contemplation of death# means that the
impelling or controlling motive is the thought of death,
regardless of whether the transferor is near the possi!ility
of death or not, which induces the disposition of the
property for the purpose of avoiding the tax.
- -xample: donation was made concurrently with the
execution of a will (;idal de )ocs vs. *osadas, 98 *hil
1<8+
0ircumstances ta4en into account in determining in
whether the transfer was made in contemplation of death:
A.+ Age and state of health of the decedent at the time of
the gift
B.+ =ength of time !etween the gift and the date of death
and
0.+ 0oncurrent ma4ing of a will or ma4ing a will within a
short time after the transfer.
No"e: 0hec4 the factual settings !efore and at time of death
!ecause proximity to death is not always conclusive.
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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-xamples of motives precluding the category of a
transfer in contemplation of death:
a.+ &o relieve the donor from the !urden of management
!.+ &o save income or property taxes
c.+ &o settle family litigated and unlitigated disputes
d.+ &o provide independent income for dependents
e.+ &o see the children en'oy the property while the
donor is alive
f.+ &o protect the family from ha7ards of !usiness
operations
g.+ &o reward services rendered
No"e,
&he T&REE 6;- <EAR (RES7M(TION provides that any
transfer of a material part of his property in the nature of a
final disposition or distri!ution thereof made !y the decedent
within three years prior to his death without such ade$uate and
full consideration shall, unless shown to the contrary, !e
deemed to !e have !een made in contemplation of death.
&his provision, however, has !een already deleted in .ec. 1<<
(!+ now sec. 89 (B+ of the &ax 0ode !y */ 6o. 1><9.
Under B%) )uling 6o. 3?1 .eptem!er 3, 1@8>, the law does
not specify the num!er of years prior to a decedents death
within which a transfer can !e considered in contemplation of
death.
No"e, %n relation to transfers with retention of rights which are
made in contemplation of death 2 if the right of retention !y
the /ecedent is co-terminous with his lifetime.
- -x: A has a house and lot which he transferred to B
a+ with the condition that A will use it while A lives
- -ffect: .till part of estate of A as he has control over it
!+ with the condition that A will use it only for 1< years and
then A dies !efore 1< years
- -ffect: 6ot part of the estate of A as he is not the actual
owner
;- Transfer 5i"# re"en"ion or reser.a"ion of +er"ain ri3#"s
- &his contemplates the instances where the owner transfers
his property during his lifetime !ut still retains economic
!enefits (the possession or en'oyment of the property or the
power to designate the person who may exercise such rights+.
- %t includes:
A. &ransfer without retention of interest !ut intended to ta4e
effect at or after the decedents death.
- -xample: donations mortis causa.
B. &ransfer with retention of interest in respect to:
- 1. &he possession or en'oyment of or the right to the
income from the property or
3. &he right either alone or in con'unction with any person,
to designate the person who shall possess or en'oy the
property or the income therefrom. And such interest is
retained !y the decedent for his life or for any period
which does not in fact end !efore his death.
0. &ransfer with reversionary interest, wherein there is a
possi!ility that the transferred property may return to the
decedent or his estate or that it may !ecome su!'ect to a
power of disposition !y the decedent.
- -x: A transfers his property to B in na4ed ownership and to
0 in usufruct throughout 0s lifetime su!'ect to the condition
that if 0 predeceases A, the property shall return to A. %f A
dies during 0s lifetime, the value of the reversionary interest
of A at death is included in his gross estate.

;- Re.o+a02e "ransfer
- the decedent has full control of disposition of property
- even if the control is not exercised, it is enough that it is
exists
- A transfer where:
a.+ &he decedent or in con'unction with any other person has
reserved the right to alter, amend, revo4e, or terminate or
!.+ Any such power is relin$uished in contemplation of the
decedents death.
&he power to alter, amend or revo4e shall !e considered to
exist on the date of the decedents death even though:
a.+ the exercise of the power is su!'ect to a precedent
giving of notice or
!.+ &he alteration, amendment or revocation ta4es effect
only upon the expiration of a stated period after the
exercise of the power.
%f the notice has not !een given or the power
has not !een exercised on or !efore the decedents
death, such notice or the power shall !e considered to
have !een given or exercised on the date of the
decedents death.
=- Transfer of )ro)er"/ 'nder a 3enera2 )o5er of
a))oin":en"
- A transfer where the donor of the power of appointment
authori7es the donee of such power to designate any person he
chooses to !e given the right over the appointed property.
- &he transferee may choose freely any person who will own
the property after he dies
- )ationale: the will of the transferee is followed hence, part
of transferees estate
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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> No"e, the decedent is the transferee in this provision
%enera2 )o5er of a))oin":en" .s s)e+ia2 )o5er of
a))oin":en",
A.+ A power is 3enera2, when it authori7es the donee of
the power to appoint any person he pleases including
himself, thus having a full dominion over the
property as if he owned it.
B.+ %t is s)e+ia2 when, the donee can appoint only among
a restricted or designated class of persons other than
himself.
No"e,
%f the power of appointment is general, it ma4es the
appointed property a part of the donees property.
Under a general power of appointment, title to the
property is legally transferred to the donee. &herefore the
property shall form part of the gross estate of the donee.
?- Transfer for ins'ffi+ien" +onsidera"ion
- A transfer that is not a !ona fide sale of property for an
ade$uate and full consideration in money or moneys
worth. &he excess of the fair mar4et value at the time of
death over the value of the consideration received !y the
decedent shall form part of his gross estate.
- Dowever, if the purported a!solute sale inter vivos !y the
decedent is shown to !e fictitious, then the total value of
the property transferred is su!'ect to inclusion in the
taxa!le estate.
- -x: A owns a house and lot, he wants to help B so he sells
his house worth *9E for only *1E. At the time of As
death, his house and lot is worth *1<E.
Dow much is included in the gross estatre of AF 1<-1 G @E
- -x: A !ought a car worth *1.5E. A needed money so he
sells his car to B for only *1E. &his is not a transfer for
insufficient consideration as this is a !ona fide transfer at
arms length hence, a valid transfer.
@- (ro+eeds of 2ife ins'ran+e
- *roceeds of life insurance ta4en !y the decedent on his own
life shall !e included in the gross estate if the !eneficiary:
A.+ %s the estate of the decedent, his executor, or
administrator (regardless whether the designation is
revoca!le or irrevoca!le+ or
B.+ &hird person other than the estate, executor,
administrator !ut the designation of the !eneficiary is
revoca!le.
- *resumption: proceeds are revoca!le
- include in the estate only if it is revoca!le as the decedent
retained control over the proceeds
A- (rior In"eres"
- -xcept as otherwise specifically provided therein,
su!sections (B+, (0+, (-+ of .ection 89 referring to transfer
in contemplation of death, revoca!le transfer and proceeds
of life insurance respectively shall apply to the transfers,
trusts, estates, interests, rights, powers and relin$uishment
of powers as severally enumerated and descri!ed therein,
whether made, created, arising, existing, exercised or
relin$uished !efore or after the effectivity of the 0&)*.
NOTE,
%n most of these transfers the property remains
su!stantially that of the transferor during his lifetime
notwithstanding the transfer since he still retains either the
"!eneficial ownership# or "na4ed title# to the property.
EXC47SIONS FROM T&E %ROSS ESTATE
1 Mer3er of 's'fr'+" in "#e o5ner of "#e naBed "i"2e
- ex: A has a house and lot. A gave the title to H.
A also allows B to use the same and that in case B dies, the
use goes to H. Ihat are the effectsF
a+ %f A dies 2 include the house and lot in As estate
!+ %f B dies 2 exclude from the estate of B as the will of A is
!eing followed, there is a merger of usufruct in H (the owner
of the na4ed title+.
2 Fidei+o::isar/ and "rans:issions fro: "#e firs" #eirC
2e3a"eeC or donee in fa.or of ano"#er 0enefi+iar/C in
a++ordan+e 5i"# "#e desire of "#e )rede+essor
- ex: A has a house and lot. %n the will of A, B may have the
title to the house and lot !ut in case B dies, the property will
go to H. Ihat are the effectsF
a+ %f A dies 2 include as part of As estate as he actually owns
it
!+ %f B dies 2 excluded from the estate of B as he has no
control over its disposition
- -x: A has a house and lot which he wants to give to B !ut B
is a minor at the moment so that A institutes & to hold the
property in trust for B until B reaches the age of ma'ority. A
died. &he property passed to &. & died. B reached the age of
ma'ority. -ffect if & dies: 6ot part of estate of &.
No"e, 0ommon reasons for 1 and 3 2 the will of the first
decedent is followed, the second decedent has no control over
the disposition.
; Transfers "o so+ia2 5e2fareC +'2"'ra2C and +#ari"a02e
ins"i"'"ions
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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- )e$uisites:
a+ Jualified organi7ation
!+ 6ot more than 5<: will !e used for administrative
purposes
- )eason: to encourage such transfers
= (ro+eeds of ins'ran+e no" in+2'di02e in "#e 3ross es"a"e
of "#e de+eden"
a+ Amount receiva!le !y any !eneficiary irrevoca!ly
designated in the policy of insurance !y the insured.
!+ *roceeds of a group insurance policy ta4en out !y a
company for its employees.
c+ *roceeds of insurance policies issued !y the K.%. to
government officials and employees.
d+ Benefits accruing under the .ocial .ecurity Act.
e+ *roceeds of life insurance paya!le to the heirs of deceased
mem!ers of the military personnel of the United .tates Army
or *hilippine Army under laws administered !y the United
.tates ;eterans Administration.
f+ Accident insurance proceeds.
? Se)ara"e )ro)er"/ of "#e s'r.i.in3 s)o'se
No"e:
%n the determination of the gross estate, the nature of the
property, whether common property of the spouses,
separate or exclusive property either of the deceased or of
the surviving spouse, !ecomes of vital importance.
1#a" re3i:e of )ro)er"/ re2a"ions s#a22 3o.ern "#e
s)o'sesD
Under the 0ivil 0ode, the hus!and and wife who got
married !efore August 5, 1@88 are governed !y the
0on'ugal *artnership of Kains, while those who got
married on or after August 5, 1@88 are governed !y the
A!solute 0ommunity of *roperty, unless a different
regime was agreed upon in the marriage settlement.
EXEM(TION FROM ESTATE TAX
A &he first *3<<, <<<.<< value of the estate (sec. 8C 6%)0+
B &he merger of the usufruct in the owner of the na4ed title.
C. &he transmission from the first heir, legatee, or donee in
favor of another !eneficiary in accordance with the desire
of the predecessor.
!. All !e$uest, devises, legacies or transfers to social welfare,
cultural and charita!le institutions, no part of the net
income of which inured to the !enefit of any individual
and provided that not more than 5<: of the said !e$uest,
etc shall !e used !y such institution for administration
purposes.
E %ntangi!le personal property of non-resident aliens under
the principle of reciprocity.
F. )etirement !enefits of employees of private firms from
private pension plans approved !y the B%).
%. Amount received for war damages.
&. Krants and donations to the %ntramuros administration.
A44O1AB4E !E!7CTIONS FROM T&E %ROSS
ESTATE
- Kranted !y mere legislative grace
- 0onstrued strictly against the taxpayer
- ReE'isi"es,
a+ .u!stantiate the claim for deduction
!+ %dentify the provision granting the deduction.
&he provision must !e clear and definite.
RESI!ENT !ECE!ENT
A Ordinar/ !ed'+"ions 6E4IT-,
1- F'nera2 Ex)enses
- &he amount deducti!le is e$ual to 9: of the gross estate or
the amount of the actual funeral expenses whichever is lower,
!ut in no case to exceed *3<<,<<<
- "Actual funeral expenses# are those which were actually
incurred in connection with the interment or !urial of the
deceased and paid for from the estate of said deceased.
- ,uneral expenses include:
a+ 0osts of coffin, tom!stone, mausoleum, and
!urial lot
!+ ,uneral parlor fees
c+ Eourning clothing of the surviving spouse and
the unmarried minor children
d+ 0osts of o!ituary notices and
e+ -xpenses during the wa4e.
- &he following cannot !e deducted under funeral expenses:
a+ 0ash advances of the surviving spouse and the heirs
!+ -xpenses paid !y the relatives and friends and
c+ -xpenses after the !urial.
- ReE'isi"es:
a+ &he expenses must !e due to the interment, wa4e and
!urial hence, expenses on the death anniversary are
not included
!+ &he expenses must have !een shouldered !y the estate
and not !y other people

2- F'di+ia2 ex)enses of "#e "es"a:en"ar/ or in"es"a"e
)ro+eedin3s
- )e$uisite: "administration expenses# to those actually
incurred in the administration of the estate.
- -xamples:
a+ fees of the executor or administrator
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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REVIEW NOTES FOR TAXATION 2 ?
!+ attorneys fees
c+ accountants fees
d+ court fees
e+ salaries of employees and
f+ All other expense related to the administration of
the estate.
No"e,
&his includes "all expenses necessary to settle or
preserve the estate# hence, extra'udicial expenses are
included.
-xpenses not essential to the proper settlement of the
estate !ut incurred for the individual !enefit of the heirs,
legatees, or devisees are not allowed as deductions.
- ex: expenses to !e declared as administrator vs. an
oppositor is a personal expense
;- C2ai:s a3ains" "#e de+eden"9s es"a"e
- /e!ts or o!ligations of the decedent that is enforcea!le
against the estate provided that the following re$uisites are
met:
a+ &hey were contracted in good faith and for an ade$uate
and full consideration in money or moneys worth.
!+ &hey must !e existing against the estate.
c+ &hey must !e legally enforcea!le o!ligations of the
decedent and ought to !e enforced !y the claimants.
d+ &hey must !e reasona!ly certain in amount and
e+ At the time the inde!tedness was incurred, the de!t
instrument was duly notari7ed and if the loan was
contracted within three (5+ years !efore the death of
the decedent, the administrator or executor shall
su!mit a statement showing the disposition of the
proceeds of the loan.
=- C2ai:s a3ains" "#e inso2.en" )ersons
- ReE'isi"es for ded'+"i0i2i"/,
a+ &he amount of said claims has !een initially included
as part of the gross estate and
!+ &he incapacity of the de!tors to pay their o!ligations is
proven and not merely alleged.
?- 7n)aid :or"3a3es inde0"edness
- ReE'isi"es for ded'+"i0i2i"/,
a+ &he fair mar4et value of the property mortgaged
without deducting the mortgage inde!tedness has
!een initially included as part of his gross estate
!+ &he mortgage inde!tedness was contracted in good
faith and for an ade$uate and full consideration in
money or moneys worth.
- ex: A o!tained a 5E loan from B and executed a )eal -state
Eortgage over his house and lot worth 9E. A paid 1E. A
died.
-ffect: in the estate of A, include the 9E in the gross estate of
A and claim as deduction the unpaid 3E.
A++o::oda"ed 4oan
- -x: A owns a house and lot worth 9E. B o!tained a 5E loan
from H with As house and lot as collateral. B paid 1E. H
died. A died.
-ffect: %nclude in the gross estate of A the 9E as receiva!le
from B (reason: right of reim!ursement+ and claim as
deduction the unpaid 3E.

@- Cas'a2"/ 4osses 6TREC7SO-
- &hey include all losses incurred during the settlement of the
estate arising from fires, storms, shipwrec4 or other
casualties or from ro!!ery, theft or em!e77lement.
- ReE'isi"es for ded'+"i0i2i"/,
a+ =osses not compensated !y an insurance or
otherwise
!+ =osses that were not claimed as a deduction for income
tax purposes and
c+ =osses incurred not later than the last day for
payment of the estate tax (? months from death+.
d+ %nclude the worth of the property in the gross estate
e+ ,ile a sworn declaration of the fact of loss within C9
days from its occurrence
A- 7n)aid Taxes
- Unpaid income tax on income due or received !efore
death of the decedent, and real property taxes, which have
accrued prior to the death of the decedent (real property
taxes accrued at the !eginning of the year !ut may !e paid
!efore or at the end of each $uarter+ are deducti!le.
- %ncome taxes upon income received after the death of the
decedent, or property taxes not accrued !efore his death,
or any estate tax cannot !e deducted !ecause they are
chargea!le to the income of the estate.
- except: estate tax !ecause estate tax lia!ility is determined at
the time of death
B 8anis#in3 $ A2"erna"in3 !ed'+"ion Or (ro)er"/
(re.io's2/ Taxed
- an amount allowed to reduce the taxa!le estate of a decedent
where the property was:
a. received !y him from prior decedent !y gift, !e$uest,
devise or inheritance, or
!. transferred to him !y gift, has !een the o!'ect of
previous transfer deduction.
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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- ;A6%.D%6K /-/U0&%16: !ecause the rate of
deduction gradually diminishes and entirely vanishes
depending upon the time interval !etween the two (3+
successive transfers.
- A=&-)6A&%6K /-/U0&%16: !ecause the present
decedents estate cannot claim it if the prior decedents
estate claimed it
- Fa+"ors necessary in vanishing deduction, these are
a. &here are two (3+ deceased persons and the first is the
donor and
!. &he second decedent dies within five (9+ years after the
death of the prior decedent or in the case of gifts the
decedent 2 donee dies within the same period after the
date of the gift.
- Ra"iona2e:
&he deduction operates to ease the harshness of
successive taxation of the same property within a relatively
short period of time.

ReE'isi"es for ded'+"i0i2i"/,
1. &he present decedent must have ac$uired the property !y
inheritance or !y donation.
3. &he property must have !een ac$uired within five (9+
years prior to the death of the present decedent
5. &he property must have formed part of the gross estate of
the prior decedent if ac$uired !y inheritance, or the taxa!le
gift of the donor if ac$uired !y donation.
C. &he estate tax or the donors tax, as the case may !e, must
have !een paid on the previous transfer.
9. &he property must !e identified as the one received from
the prior decedent or from the donor, as the case may !e.
?. &he estate of the prior decedent must not have previously
availed of the vanishing deduction on the su!'ect property.
(ro+ed're in +o:)'"in3 .anis#in3 ded'+"ions,
1. ;alue ta4en of property previously taxed
=ess:Eortgage paid !y the present decedent on property
previously mortgaged !y prior decedent L donor, if any
(%st deduction+
G %nitial !asis
3. %nitial !asis divided !y the value of the gross estate of
present decedent A -xpenses, and transfer for pu!lic purpose
G3
nd
deduction
5. %nitial Basis
=ess: 3
nd
deduction
,inal Basis
Eultiplied !y rate deduction (sec.8? (A.3+, 6%)0+
;anishing /eduction
C Transfers For ('02i+ 7se
- ReE'isi"es,
1. &he disposition must !e testamentary in character.
3. &o ta4e effect after death.
5. %n favor of the government of the *hilippines, or any
political su!division thereof.
C. -xclusively for pu!lic purpose.
9. %ncluded in the gross estate
G'er/, %f in a will the property was !e$ueathed to a city and
an 6K1, are the tax effects the sameF 6o.
a+ 0ity - included in the gross estate and claimed as deduction
!+ 6K1 2 excluded from the gross estate and su!'ect to the
limitation that not more than 5<: must !e used for
administrative purposes
! Fa:i2/ &o:e
- )efers to the dwelling house, including the land on which
it is situated, where the hus!and and wife, or an
unmarried person who is the head of the family and
mem!ers of their immediate family resides as certified !y
the Barangay 0aptain of the locality.
- ,or the purpose of availing of a family home deduction to
the extent provided !y law, a person may constitute only
one family home.
- &he amount deducti!le is e$uivalent to the current fair
mar4et value of the decedents family home if said
current fair mar4et value exceeds (1C000C000, the excess
shall !e su!'ect to estate tax.

- ReE'isi"es "o 0e ded'+"i02e,
a. &he family home must !e the actual residential home of the
decedent and his family at the time of his death. (/ecedent
is married and has dependents or is a head of family with
dependents.+
!. .uch fact must !e certified !y the Barangay 0aptain of the
locality where the family is situated.
c. &he total value of the family home must !e included in the
gross estate of the decedent.
d. &he allowa!le deduction must !e in an amount e$uivalent to
the current fair mar4et value of the family home as
declared or included in the gross estate not exceeding
*1, <<<,<<<.

E S"andard !ed'+"ion Of (1C 000C00000
- on top of other deductions, unli4e the optional standard
deduction which is in lieu of other deductions hence, it does
not include the * 3<<,<<< exemption
F Medi+a2 Ex)enses
- )e$uisites:
a. Eust !e incurred !y the decedent within one (1+ year
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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prior to his death
!. Eust !e duly su!stantiated !y receipts and
c. Eust not exceed *9<<, <<<
M1pinion of NB: medical expense must !e related to the cause
of death as it is the estate that is !eing settled. 1therwise, if
not related, it is a personal expense.
% A:o'n"s Re+ei.ed B/ &eirs 7nder RA =91A Fro:
T#e !e+eden"9s E:)2o/er As A ConseE'en+e Of T#e
!ea"# Of T#e !e+eden"HE:)2o/eeC (ro.ided T#a" S'+#
A:o'n" Is In+2'ded In T#e %ross Es"a"e Of T#e !e+eden"
- retirement !enefits
- )e$uisite: include in gross estate
& NET S&ARE OF T&E S7R8I8IN% S(O7SE IN T&E
CONF7%A4 $ COMM7NIT< (RO(ERT<
- )e$uisite: %nclude the entire amount in the gross estate then
deduct the share of the surviving spouse
- -x: D owns a car worth 1E and a house and lot worth 9E
I owns a truc4 worth 3E and 'ewelry worth 1<E
D and I owns a con'ugal lot worth 3<E
D died.
Kross estate of D:
Ex+2'si.e Con*'3a2
? M #o'se and 2o" 20 M 2o"
1E car OOOOOOOOO OOOOOOO
?E 3< E
&otal gross estate G 3? E
&hen claim as deduction the 1<E, which is the P share of
the surviving spouse in the con'ugal lot.
- -x: D and I died simultaneously. %n computing the gross
estate of D and I, their shares P shares as to the con'ugal lot
may immediately !e split as there is no surviving spouse left.
I- Tax Credi" For Es"a"e Tax (aid To A Forei3n Co'n"r/
- &he estate tax imposed !y the tax code shall !e credited with
the amount of any estate tax paid to a foreign country.
- 0oncept: if a property located in the *hilippines was already
su!'ected to estate tax a!road and the same property is also
su!'ected to estate tax in the *hilippines, the foreign tax paid
is allowed to reduce his *hilippine estate tax
- *urpose: minimi7e the effect of international dou!le taxation
- applica!le only to residents and citi7ens, not to 6)A since
he is taxed only on his properties within the *hilippines
hence, the 6)A will not !e made to pay estate taxes twice for
his property located a!road G no international dou!le taxation
G no tax credit. (.ec. 8? (-+(3++
- ReE'isi"es,
1. *rove that the foreign estate tax has !een paid
3. *rove reciprocity : that in the decedents foreign country, a
similar tax credit is given to ,ilipinos
4i:i"a"ions on "ax +redi":
A.+&he tax credit limit for estate taxes paid to one foreign
country is determined !y the following:
&AA 0)-/%& =%E%&G
/ecedents 6et -state situated in a foreign country x *hil.
-state tax of the -ntire net estate
B.+ &he tax credit limit for estate taxes paid to two or more
countries is determined as follows:
&AA 0)-/%& =%E%& G
/ecedents net estate situated outside of the *hil A *hil.
-state tax of -ntire net -state
No"e,
1.+ Under limitation A the allowa!le tax credit is the lower
amount !etween the tax credit limit and the estate tax paid
to the foreign country.
3.+ Under limitation B the allowa!le tax credit is the lower
amoun" !etween the tax credit limit computed under (A+
and that computed under (B+
B- IF !ECE!ENT IS A NON H RESI!ENT A4IEN
&he deductions allowed to citi7ens or residents of the
*hilippines are also extended to a non-resident alien decedent
with respect to his estates situated in the *hilippines at the
time of his death.
%n case of deductions for expenses, losses,
inde!tedness and taxes, the amount of the allowa!le deduction
is limited only to the proportion of such deductions with the
value of such part of his gross estate which at the time of his
death, is situated in the *hilippines, !ears to the value of his
entire gross estate wherever situated. (.ec. 8? (B++
For:'2a,
Allowa!le deduction of non-resident estate G
(#i2i))ine %ross Es"a"e x !ed'+"ions C2ai:ed
En"ire %ross es"a"e

As a prere$uisite to the deduction, it must !e
included in the return re$uired to !e filed the value at the time
of his death, of that part of the gross estate of the non-resident
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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not situated in the *hilippines, to determine the rata!le portion
of the deduction for expenses allowa!le.
8a2'a"ion of (ro)er"/
&he estate shall !e appraised at its fair mar4et value (,E;+ at
the time of death of the decedent (.ec.88, 6%)0+. &his is
regardless of any su!se$uent contingency affecting the estate.
!"orenzo #s. Posadas, $% Phil. &'&(
1 Rea2 (ro)er"/
- higher amount of :
a+ ,E; as determined !y the 0ommissioner
- &his is the 7onal value (of the land+ as fixed !y the 0%),
and can !e o!tained from the B%) we!site or regional
office
!+ ,E; fixed !y the provincial or city assessor
- &his is the value as shown in the tax declaration of
the property
- Use this amount for real properties with no 7onal
values (i.e. real properties other than land such as
!uildings and improvements+
> No"e , &he law does not state that the prevailing mar4et rate
or the consideration as a !asis for determining the ,E;
> No"e, %f there are no improvements in the property, get a
0ertificate of 6o-improvement, (which you can get only after
o!taining a 0ertificate of 6on-tax delin$uency+ and attach
these to the estate tax return.
2 (ersona2 (ro)er"ies
a- S#ares of S"o+B
- !oo4 or par value at the time of death, and can !e o!tained
!y writing a letter of in$uiry, as4ing for a formal certification
from the corporation which issued the shares of stoc4 as to the
value of such stoc4 at the time of death of the decedent
0- In.en"ories
- value as stated in the invoices (i.e.: price at purchase+ or the
prevailing mar4et rate (as4 for the value from those engaged
in the same !usiness+ or if value cannot !e definitely
ascertained, state the approximate reasona!le value (!ut this
will !e su!'ect to the discretion of the B%) inspector+
+- Mo"or .e#i+2es
- these depreciate 3<: per year from purchase
- Dence, motor vehicles are fully li$uidated and has no estate
tax lia!ility after 9 years !ut include in the gross estate placing
7ero as the amount (to secure a tax clearance therefor+
; Ri3#" "o 7s'fr'+"C 'se or #a0i"a"ionI or ann'i"/
- pro!a!le life of the !eneficiary shall !e ta4en into account, in
accordance with the latest !asic mortality ta!le, to !e
approved !y the .ec. of ,inance, upon recommendation of the
%nsurance 0ommissioner
Fi2in3 of No"i+e of !ea"#
Ihere the gross value of the estate exceeds * 3<,<<< although
exempt, the executor, administrator, or any of the legal heirs
shall give, within 3 months after the decedents death or
within li4e period after the executor or administrator $ualifies
as such, a written notice thereof, to the 0ommissioner of
%nternal )evenue. (.ec. 8@, 6%)0+
- 0ontents of the letter:
1. &he fact that the decedent died
3. )esidence of the decedent
5. /ate of death
- -ffect of failure to file notice: su!'ect to penalty not lower
than *1,<<<
> No"e: ,iling with the nearest )evenue /istrict 1ffice is
sufficient compliance.
Fi2in3 of Re"'rn and (a/:en" of Tax
).( B* +hom,
An estate tax return under oath is re$uired !y law to
!e filed !y the executor, administrator, or any of the
legal heirs:
a.+ Ihere the gross value of the estate exceeds
*3<<,<<< though exempt from the estate tax or
!.+ )egardless of the gross value of the estate, where
the said estate consists of registered or
registra!le real property, such as real property
(land, !an4 accounts, others with definite
records+, motor vehicle, shares of stoc4 or other
similar property for which a clearance from the
Bureau of %nternal )evenue is re$uired as a
condition precedent for the transfer of ownership
thereof in the name of the transferee.
-.( .hen to file,
&he return shall !e filed within ? months from
the decedents death.
&he 0ommissioner shall have the authority to
grant, in meritorious cases, a reasona!le
extension not exceeding 5< days for filing the
return.
5.+ .here to file,
-xcept in cases where the 0ommissioner otherwise
permits, the return shall !e filed with:
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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M if the decedent is a resident
a+ an authori7ed agent !an4
!+ )evenue /istrict 1fficer
c+ )evenue 0ollection 1fficer
d+ duly authori7ed treasurer of the city or
municipality where the decedent was domiciled
at the time of his death, or

M if the decedent is a non-resident
a+ with the )evenue /istrict 1ffice where his
executorLadministrator is registered
!+ with the )evenue /istrict 1ffice having
'urisdiction over the residence of the
executorLadministrator
e+ with the 1ffice of the 0ommissioner if the
decedent has no executor or administrator
%.( /opies
&he return shall !e filed in triplicate, two (3+ for the B%)
and one (1+ copy for the taxpayer.
'.( .hen to Pa*
*ay the estate tax at the time you will file your estate tax
return. (*ay as you file system+
?.+ 0xtension for Pa*ment:
- allowed in meritorious cases when the 0ommisioner
finds that the payment of the esate tax on the due date
would impose undue hardships upon the estate or any heir
:
At most 3 years 2 if estate extra'udicially settled
At most 9 years 2 if estate 'udicially settled
- NOTE, &he taxpayer must not !e guilty of
a+ negligence
!+ intentional disregard of the rules and regulations, or
c+ fraud
- the taxpayer may also !e re$uired to pay a !ond not
exceeding dou!le the amount of tax and with such sureties, as
the 0ommissioner deems necessary
> No"e: &he filing of the estate tax return is not sufficient to
o!tain a tax clearance, the administratorLexecutorLheir must
su!mit additional documents to determine the correctness of
the values stated !y him in the estate tax return.
- such as the title of the land, tax declaration of the land and its
improvements or 0ertificate of 6o-improvement, vicinity map
to fix the exact location and 7onal value, etc.
()ead: )evenue Eemorandum 1rder 19-3<<5+
> No"e, &o avoid the imposition of penalties while there is no
extraL'udicial settlement yet, any heir may file a sworn
declaration to the B%) stating the fact of death, that the estate
has not yet !een settled and the list of the properties included
in the estate, as !asis for payment of estate tax.
If %ross Es"a"e J2MC addi"iona2 reE'ire:en",
- must su!mit a certificate of an independent 0*A stating:
1. itemi7ed assets of the decedent with corresponding
gross value at the time of his death
or if 6)A, that part of his gross estate situated in the
*hilippines
3. itemi7ed deductions from the gross estate
5. amount of tax due, whether paid or still due and
outstanding
4ia0i2i"/ for (a/:en" of Es"a"e Tax
*rimarily =ia!le : -xecutor or administrator - !efore
delivery to any !eneficiary of his distri!utive shares.
After due payment, the executor or administrator shall !e
discharged from personal lia!ility.
.u!sidiarily =ia!le : Beneficiary - to the extent of his
distri!utive share, lia!le for the portion of the estate tax as
his distri!utive share !ears to the value of the total net
estate.
NOTE, &here are two ways the government may enforce
collection of estate taxes from the decedents heirs:
1. %t can collect from all the heirs the amount of the estate tax
proportionate to the inheritance they received.
3. %t can su!'ect properties of the estate which are in the hands
of the heirsLtransferees to the payment of the tax. (0%) vs.
*ineda, 31 .0)A 1<9+
NOTE, &he heirs have a solidary o!ligation to settle the
estate. Dence, the B%) can collect from or sue any of the heirs,
!ut only up to the amount of that heirs share in the hereditary
estate. &his is without pre'udice to such heirs right of
reim!ursement from his co-heirs of their share in the payment
of the estate tax. (0%) vs. *ineda, 31 .0)A 1<9+
Meas'res "o Ins're (a/:en" of Es"a"e Tax
a. 6o 'udge shall authori7e the executor or 'udicial
administrator to deliver a distri!utive share to any party
interested in the estate unless a certification from the
0ommissioner that the estate tax has !een paid as shown.
(.ec.@C+
- !y the court re$uiring the executorLadministrator to su!mit
an inventory of properties of the estate, these properties are to
!e distri!uted only after payment of estate taxes and receipt of
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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clearance !y the 0ommissioner or his duly authori7ed
representative
- 61&-: &he approval of the pro!ate court is not re$uired
!efore estate taxes may !e collected. &he enforcement and
collection of taxes are executive in nature. (Earcos %% vs. 0A,
3>5 .0)A C>+
!. )egisters of /eeds shall not register in the
)egistry of *roperty any document transferring real property
any document transferring real property or real right therein or
any chattel mortgage, !y way of gift inter vivos or mortis
causa, legacy or inheritance, unless certification from the
commissioner that the tax has !een paid and the y shall
immediately notify the 0ommissioner, )egional /irector,
)evenue /istrict 1fficer, or )evenue collection 1fficer or
treasurer of the city or municipality where their officer are
located, of the non-payment of the tax discovered !y them.
(.ec. @9+
- !efore the properties are transferred in the name of the heirs,
a 0ertificate Authori7ing )egistration (0A)+ must !e shown
c. Any lawyer notary pu!lic, or any Kovernment
1fficer who, !y reason of his official duties, intervenes in the
preparation or ac4nowledgement of documents regarding
partition or disposal of donation inter vivos or mortis causa,
legacy or inheritance, shall have the duty of furnishing the
0ommissioner, etc., with copies of such documents and any
information whatsoever, which may facilitate the collection of
the aforementioned tax. (.ec. @9+
- ex: deed of extra'udicial settlement, deed of donation
d. 6either shall a de!tor of a deceased pay his de!ts
to the heirs, legatees, executor or administrator of his creditor,
unless a certification of the 0ommissioner that the tax fixed
has !een paid is shown !ut he may pay the executor or
'udicial administrator without said certification if the credit is
included in the inventory of the estate of the deceased. (.ec.
@9+
- else: de!tor may !e personally lia!le for the payment of the
lost tax, li4e a withholding agent who fails to withhold taxes
e. 0orporations, sociedad anonima, partnerships,
!usiness or industry organi7ed in the *hilippines shall not
transfer in their !oo4s any shares o!ligations, !onds or rights
!y way of gift inter vivos or mortis causa, legacy or
inheritance to the new owner unless a certification from the
0ommissioner that the taxes fixed and due thereon have !een
is shown (.ec. @>+
- o!ligation of corporate secretary
f. %f a !an4 has 4nowledge of the death of a person
who maintained a !an4 deposit account alone or 'ointly with
another, it shall not allow any withdrawal from the said 'oint
deposit account unless the 0ommissioner has certified that the
estate taxes imposed thereon have !een paid. Dowever, the
administrator of the estate or any of the heirs of the decedent
may, upon authori7ation !y the 0ommissioner of %nternal
)evenue withdraw an amount not exceeding * 3<,<< without
the said certification . (.ec. @>+
- ,or this purpose, all withdrawal slips shall contain a
statement to the effect that all of the 'oint depositors are still
living at the time of withdrawal !y any one of the 'oint
depositors and such statement shall !e under oath. 1therwise,
the 'oint depositor will !e lia!le for per'ury (.ec. 3?>+.
- 'oint accounts covered !y this rule include "and# and
"andLor# accounts, !ut do not include an account su!'ect to a
.urvivorship Agreement with a survivor-ta4e-all feature
(!ecause there is an automatic transfer of right to the survivor
hence, not included in gross estate of the 'oint depositor who
died 2 tax avoidance scheme+
g. &he estate tax together with interest, penalties, and
costs that may accrue in addition thereto constitutes a lien
upon all property and rights to property !elonging to the
taxpayer. &he lien attaches when the taxpayer neglects or
refuses to pay after demand. (.ec. 31@+
h. %n 'udicial settlement of estates, the court is
re$uired to furnish the commissioner of %nternal )evenue a
certified copy of the schedule of participation and the court
order approving the same within 5< days after its
promulgation. (.ec. @1(!++
i. &he estate tax shall !e paid !y the executor or
administrator !efore delivery to any !eneficiary his
distri!utive share of the estate (.ec. @1 (c++. De may !e
discharged from personal lia!ility for deficiency in the estate
tax only after written application to the commissioner and
upon determination that no such deficiency appears. (.ec.
@3+
NOTE, Addi"iona2 Readin3s
1. )evenue )egulation 3-3<<5
3. )evenue Eemorandum 1rder 19-3<<5
TAX TI(S, A.oidan+e of Es"a"e Tax 4ia0i2i"/
1. Eaximi7e your claims for deductions such as the use of the
transfers falling under the exclusions from gross estate.
3. /onate properties to your relatives as the tax rates for
donors taxes are lower than for estate taxes.
5. -state *lanning (.ection C< (c+, 6%)0+
- execute a /eed of -xchange the properties of at most 9
persons in exchange for shares of stoc4 in order to o!tain
control of the corporation (more than 91: ownership+
- this exchange is not taxa!le for income tax purposes
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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- more tax savings if real properties are exchanged
- the properties in the deed will no longer !e part of the
gross estate as it is now owned !y the corporation
- the stoc4 shares will !e included in the gross estate !ut the
tax would !e lower as the value at time of death might still
!e the same original value at the time of exchange on the
other hand, if there was no exchange the estate tax for the
land would !e higher as the value of the land at time of
death will !e higher than at the time of the ac$uisition.
C. .et up a living trust
- &rust: o!ligation imposed !y a person regarding his
property
- 0reate an irrevoca!le trust over your properties so that
they will not form part of your gross estate when you die.
&his is !ecause the %rrevoca!le &rust is a new taxpayer
created.
- -x: grandfather (Krantor+ during his lifetime would li4e to
give certain properties to his grandchild. Until he reaches
the age of maturity, the properties will !e held in trust !y A
(trustee+ for the grandchild (Beneficiary+.
!ISTINCTION BET1EEN !ONOR9S AN! ESTATE
TAX
!ONOR9S TAX ESTATE TAX
&ax on the privilege to
transmit property during the
lifetime of the donor
&ax on the privilege to
transmit property upon ones
death
&ax rates are lower (3 to 19+ &ax rates are higher (9 to3<+
-xemption is only *
1<<,<<<.<<
&ax exemption is
*3<<,<<<.<<
6otice of donation is
generally not re$uired
6otice of death is re$uired
-xtension of payment is not
provided
-xtension of payment may
!e granted !y the
0ommissioner of %nternal
)evenue
*aya!le within 5< days from
the date of gift
*aya!le within ? months
from the date of death
%mposed on the net gift %mposed on the net estate
II !ONOR9S TAX $ %IFT TAX
A NAT7RE
- %t is an excise (privilege+ tax, imposed on the privilege of the
donor to give or on the privilege of the done to receive. %t is
not a tax on the property as such !ecause its imposition does
not rest upon general ownership.
- &he tax is imposed without reference to the death of the
donor unli4e in the case of estate tax.
!ona"ion $ %if"
- an act of li!erality where!y a person disposes gratuitously of
a thing or right in favor of another who accepts it.
- ,or tax purposes, the term has a much wider meaning, it
includes:
a. any transfer in trust or otherwise, whether the gift is
direct or indirect, and whether the property is real or
personal, tangi!le or intangi!le. (.ec. @8+
!. any transfer of property !y gift, except in forced sales
and in the sale of real property which is a capital asset,
for less than and ade$uate and full consideration in
money or moneys worth. (.ec. 1<<+
c. 0ondonation or remission of de!t, where the creditor
merely desires to !enefit a de!tor and without any
consideration therefore cancels the de!t.
ReE'isi"es Of A Taxa02e %if",
1.+ 0A*A0%&B of the donor to ma4e the donation
3.+ /16A&%;- %6&-6& or %6&-6& on the part of the
donor to ma4e a gift
5.+ /-=%;-)B, whether actual or constructive, of the
gift and
C.+ A00-*&A60- of the gift !y the donee.
No"e,
A. &he donee, unli4e the donor need not !e capacitated.
B. donors tax applies now to !oth natural and 'uridical
persons.
0. donative intent must !e present in direct gift !ut with
respect to indirect gift, e.g. transfer of property for less
than an ade$uate and full consideration, donative intent is
superfluous. &hus, donative intent is not always essential
to constitute a gift.
/. %n A!ello vs. 0%) (,e!. 39, 3<<9+, donative intent is
evidenced !y a reduction of patrimony of one and an
increase in patrimony to the other.
('r)oses Of %if" Tax
1.+ &he gift tax was enacted originally to supplement the
estate and inheritance taxes !y preventing their avoidance
through the taxation of gifts inter vivos.
3.+ &he donors tax is also intended to prevent the
avoidance of income tax through the device of splitting
income among numerousLdifferent donees with the donor
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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REVIEW NOTES FOR TAXATION 2 15
there!y escaping the effect of the progressive rates of
income taxation.
Kinds Of %if" Taxes,
1. /onors tax or tax levied on the act of giving it
supplements the estate tax and
2. /onees tax or tax levied on the act of receiving it
was formerly the counterpart of the inheritance tax, which
has !een integrated into an estate tax.
>Both taxes have now !een integrated into a donors tax.
(ar"ies To A !ona"ion:
1. /onor - the *erson who disposes of his property or right.
3. /onee - the *erson who receives the property or right.
(ro)er"ies In+2'ded In T#e Ter: K%if"L
6A- In "#e +ase of residen" +i"iMensC non-residen" +i"iMens
and residen" a2iens,
1. )eal property within and without the *hilippines.
3. &angi!le personal property within and without the
*hilippines and
5. %ntangi!le personal property within and without the
*hilippines.
6B- In "#e +ase of non-residen" a2iens:
1. )eal property within the *hilippines.
3. &angi!le personal property within the *hilippines.
5. %ntangi!le personal property within the *hilippines,
unless there is reciprocity in which case, it is not
taxa!le.
No"e,
&he specific items includi!le in the "gross estate# are
applica!le to and are em!raced !y the term "gift#.
B FACTORS AFFECTIN% 4IABI4IT< FOR %IFT
TAXES
1 Re2a"ions#i) of "#e donor and "#e donee
a+ when the donee is considered a stranger to the
donor, the donors tax shall !e 5<: of the net gifts.
!+ when the donee is a relative of the donor, the tax
shall !e !ased on the 3-19: ta!le under .ec. @@(A+.
S"ran3er
1.+ one who is not a :
(a+ !rotherLsister (whole or half !lood+, spouse,
ancestor and lineal descendant
(!+ relative !y consanguinity in the collateral line
within the fourth degree of relationship
3.+ donations made !etween individuals and !usiness
organi7ations are considered donations to
strangers
5.+ donations made !etween !usiness organi7ations
are considered donations made to strangers
()) 3-3<<5+
No"e, /onees who have no !lood relation to the donor are
considered strangers to the donor, such as those made to ones
in-laws or to 'uridical persons.
2 8a2'e of "#e %if"
- the higher the value of the gift, the higher the gift taxes
C !E!7CTIONS $ EXEM(TIONS FROM %IFT TAX
1 %if"s Made 0/ a Residen":
a.+ /owries or gifts made on account of marriage !efore its
cele!ration or within one year thereafter !y parents to each of
their legitimate, illegitimate or adopted children to the extent
of the first *1<,<<<.<<.
ReE'isi"es,
1. &he donation must !e given on account of marriage.
2. &he parent must give it to his child.
3. &he child must !e either the legitimate, recogni7ed
natural or legally adopted child of the donor, and
4. %t must !e given !efore or one year after the
cele!ration of the marriage.
!.+ Kifts made to or for the use of the 6ational Kovernment or
any of its agencies which is not conducted for profit, or to any
political su!division of the said government.
c.+ Kifts in favor of educational, charita!le, religious, cultural
or social welfare corporation, institutions, foundations, trust or
philanthropic organi7ation, research institution or
organi7ation, or accredited non-government organi7ation.
*rovided, that no more than 5<: of said gifts shall !e used !y
such donee for administration purposes.
No"e,
,or purposes of exemption, a non-profit educational
andLor charita!le corporation, institution, accredited non-
government organi7ation, trust or philanthropic
organi7ation is defined as:
school, trust or university andL or charita!le
corporation, foundation trust or philanthropic
organi7ation andL or research institution or
organi7ation incorporated as a non-stoc4 entity:
paying no dividends.
governed !y trustees who receive no compensation
and
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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REVIEW NOTES FOR TAXATION 2 1C
devoting all its income to the accomplishment and
promotion of the purposes enumerated in its articles
of incorporation.
No"e,
1nly donations made to non-stoc4, non-profit educational
institutions are exempt from gift taxes as although Article 1C
of the 0onstitution states that proprietary educational
institutions may !e given the same privileges su!'ect to a
guideline as a guideline, the 6%)0 does not provide for such
exemption to them.
2 %if"s :ade 0/ a Non-Residen" A2ien
a.+ Kifts made to or for the use of the 6ational Kovernment
or any entity created !y of its agencies which is not
conducted for profit, or to any political su!division of
the said government.
!.+ Kifts in favor of educational, charita!le, religious,
cultural or social welfare corporation, institution,
foundations trust or philanthropic organi7ation, research
organi7ation or institution *rovided, that no more than
5<: of said gifts shall !e used !y such donee for
administration purposes.
No"e, doesnt include accredited 6K1
No"e,
1. %ntangi!le personal property in the gross gift of a 616-
)-.%/-6& A=%-6 donor shall !e taxa!le in the *hilippines,
if the *)%60%*=- 1, )-0%*)10%&B is not cogni7a!le.
3. %ntangi!le personal properties considered situated in the
*hilippines.
,ranchise which must !e exercised in the *hilippines
.hares of stoc4s issued !y any corporation or
sociedad anonima organi7ed or constituted in the
*hilippines in accordance with its laws.
.hares of stoc4s issued !y any foreign corporation
89: of the !usiness of which is situated in the
*hilippines.
.hares of stoc4 issued !y a foreign corporation, if
such shares, o!ligations, or !onds, have ac$uired a
!usiness situs in the *hilippines and
.hares or rights in any partnership, !usiness or
industry esta!lished in the *hilippines.
! TAX TREATMENT OF (RO(ERTIES
TRANSFERRE! FOR 4ESS T&AN F744 $ A!EG7ATE
CONSI!ERATION
Keneral )ule: &he amount !y which the ,E; of the property
exceeded the value of the consideration shall !e deemed a gift
-xception: real properties classified as capital assets (not used
in !usiness+ as there were already su!'ected to 0apital Kains
&ax
E TAX TREATMENT OF (O4ITICA4
CONTRIB7TIONS
- any contri!ution in cash or in 4ind to any candidate, political
party or coalition of parties for campaign purposes shall !e
governed !y the -lection 0ode hence, this is not su!'ect to
gift tax (report to 01E-=-0F+
F TAX CRE!IT FOR !ONOR9S TAXES (AI! TO A
FOREI%N CO7NTR<
1. /onor was a ,ilipino citi7en or resident alien, at the time
of foreign donation
3. /onors taxes of any character and description are imposed
and paid !y the authority of a foreign country.
4i:i"a"ions,
A.+ ,or donors tax paid to one forei3n +o'n"r/I
&he amount of tax credit in respect to the tax paid to
any country shall not exceed the same proportion of the
tax against which credit is ta4en which the net gifts
situated within such country taxa!le under the 6ational
%nternal )evenue 0ode !ears to his entire net gift, and
B.+ ,or donors tax paid to "5o or :ore forei3n +o'n"ries,
&he total amount of the credit shall not exceed the
same proportion of the tax against which such credit is
ta4en, which the donors net gift situated outside the
*hilippines taxa!le under the 6ational %nternal )evenue
0ode !ears to his entire net gift.
For:'2a,
1. /onors &ax *aid to 1 ,oreign 0ountry
&ax 0redit =imit G
6et gift situated in a foreign country A *hil. /onors &ax
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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-ntire net gifts

3. /onors &axes paid to 3 or more ,oreign 0ountries
&ax 0redit =imit G
6et gifts outside the *hilippines A *hil. /onors &ax
-ntire net gifts
No"e,
Under limitation A the allowa!le tax credit limit is
the =1I-) AE1U6& !etween the tax credit limit
and the gift tax paid to the foreign country.
Under limitation B the allowa!le tax credit is the
=1I-) AE1U6& !etween the tax credits limit
computed under A and that computed Under B.
No"e, 8oid !ona"ions Are No" S'0*e+" To !onor9s Tax
.uch as:
Between hus!and and wife, even if the relationship has
not !een solemni7ed.
Between persons guilty of adultery or concu!inage.
Between those found guilty of the same criminal offenses.
Between those made to a pu!lic officer or his wife,
descendants, ascendants !y reason of his office.
No"e, Effe+"s Of %enera2 And S)e+ifi+ Ren'n+ia"ion
- An heirs general renunciation of inheritance in favor of a
co-heir is not su!'ect to donors tax, !ut if it is specifically
renounced in favor of a co-heir to the exclusion of others, it
shall !e su!'ect to donors tax.
No"e, Ren'n+ia"ion of a s'r.i.in3 s)o'se of #is$#er s#are
in "#e +on*'3a2 )ar"ners#i) or a0so2'"e +o::'ni"/ af"er
disso2'"ion of :arria3e
- whether made in favor of the heirs of the deceased spouse or
in favor of a third person, the same is su!'ect to donors tax
% NET %IFT
- the total amount of gifts less the allowa!le deductions and
specific exemptions.
- the total net gifts made during the .AE- calendar year is
used as !asis for computing the donors tax
& 8A47ATION
- the gift tax is !ased on the fair mar4et value of the gift at the
time it was given
I 4A1 A((4ICAB4E
- the law in force at the time of the perfection L completion of
the donation shall govern the imposition of donors tax. A
donation is considered as completed ,1) &AA *U)*1.-.
at the time the donee accepts the gift.
F A!MINISTRATI8E (RO8ISIONS
1 Fi2in3 of no"i+e of dona"ion
Keneral )ule: ,iling of notice of donation is not re$uired
-xception: if the donor wishes to claim exemption from tax
and the donee is an organi7ation under .ec.1<1(A5+ and .ec.
1<1 (B3+
)e$uisites to !e exempt from gift tax :
1. /onor is engaged in !usiness
3. /onee is any of the organi7ations mentioned under .ec.
1<1(A5+ and .ec. 1<1 (B3+
5. /onor must give notice to the )/1 on every donation
worth at least *9<,<<<.
C. &he notice must !e given within 5< days from the
issuance !y the donee of a 0ertificate of /onation.
9. &he certificate of /onation must !e attached to the
notice.
2 Fi2in3 of !onor9s Tax Re"'rn
- within 5< days after the completion of the gift
- donation is completed ,1) &AA *U)*1.-. at the time the
donee accepts the gift
- 0ontents:
1. Kifts made during the calendar year
3. /eductions claimed and allowed
5. *revious net gifts made during the year
C. 6ame of the done
9. )elationship of the donor and the done
?. 1ther information as may !e re$uired
; (a/:en" of !onor9s Tax
- pay as you file the tax return
- 6ote: if the donors tax was paid for the transfer, there is no
more need to su!'ect the transfer again to estate tax. Applying
the Bac4 &ax &heory, there is no tax that remained unpaid
regarding this transfer.
= Ex"ensions For (a/:en" Of !onor9s Tax
- the 6%)0 does not provide for any extension for payment of
gift tax, as it is presumed that if you can donate, you still have
sufficient properties to pay for the tax. Unli4e in estate tax
where extension is granted, !ecause the payment of the tax
may cause undue hardship on the heirs specifically for non-
li$uid properties which re$uires time to !e sold first to !e
converted into cash for payment of the estate tax.
TAX TI(S , A.oidan+e of %if" Taxes
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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-xecute a /eed of -xtra-'udicial .ettlement with simultaneous
general renunciation of all inheritance
(!y operation of law, the renounced inheritance will go to the
co-heirs anyway+.
(ROB4EMS ON !O1R< !E!7CTION
1. A is the child of D and I
Nanuary 2 A got married, D and I gave him *3,<<<
Earch 2 D and I gave A *3,<<<
April 2 D and I gave A another *3,<<<
0an the parents claim dowry deduction even if these were
made on a staggered !asisF
- Bes, provided these were made on account of marriage,
!efore the marriage or 1 year thereafter.
3. Nanuary - A married B and was given dowry
,e!ruary 2 B died
/ecem!er 2 A married 0 and was given dowry
0an the parents of A still claim dowry deduction even if it was
claimed already for the Nanuary dowryF
- &here is no rule on the matter yet !ut it is su!mitted that as it
was made on account of 3 different marriages, the deduction
for the /ecem!er dowry may !e made.
5. A and 0 are the children of D and I
Nanuary - A married B, given dowry
,e!ruary 2 0 married /, given dowry
0an D and I claim dowry deduction for !othF
-Bes, as the dowries were given to different children
C. D and I 'ointly donated to their child A 1E on account of
his marriage to B. .how computation.
,or each of D and I the computation is:
9<<,<<< 2 to A 39<,<<<
- to B 39<,<<<
A B
39<,<<< 39<,<<<
-1<,<<< OOOOOOO
3C<,<<< 39<,<<<
M3 to 19: M 5<:
5, ?<< >9,<<<
No"e, /o not deduct the first 1<<,<<< in case of donee-
relatives as this is incorporated already in the ta!le under
.ection @@.
Keneral )ule: D and I are considered separate and distinct
taxpayers for purposes of donors tax.
-xception: Ihat was donated is a con'ugal property and only
D signed. &here is only one donor, without pre'udice to
the right of I to $uestion the validity of the donation
without her consent.
(ROB4EMS
1. /onations made !y A
Nanuary 2 5<<,<<< to his !rother
April 2 C<<,<<< to his sister
August 2 9<<,<<< to his mother
0ompute donors tax:
a+ ,or Nanuary donation
G 5<<,<<< M (percentage in the 3 to 19: ta!le+ G tax
!+ ,or April /onation
G (5<<,<<< Q C<<,<<<+ M (3 to 19: ta!le+ G tax
c+ ,or August /onation
G (5<<,<<< Q C<<,<<< Q ><<,<<<+ M (3 to 19: ta!le+
G tax less tax paid for Nanuary and April
3. A wants to give B 3<<,<<<, will there !e tax savings to A if
he will donate one time the amount of 3<<,<<< or should he
split !y donating 1<<,<<< on /ecem!er 3<<> and 1<<,<<< on
Nanuary 3<<8F
- %t depends if A and B are relative or not.
a+ relatives 2 yes, there will !e savings as under the ta!le in
.ection @@, the first 1<<,<<< is exempt from /onors tax. 6o
donors tax will then !e paid for !oth donations.
!+ strangers 2 nom there will !e no tax savings. A flat rate if
5<: is imposed on donations made !etween strangers hence,
the same amount of *?<,<<< donors tax will !e paid whether
made one time or split.
5. A died and left 1E each to his heirs A, B, 0. &he heirs
agreed to settle extra'udicially.
a+ A renounced his inheritance in favor of B. %s there lia!ility
for donors taxF
- Bes, this is a case of waiver. A is deemed to have accepted
the property !efore he gave it to B as one cannot give what
one does not own. A specific renunciation is taxa!le.
!+ A renounced his share without specifying a co-heir who
will receive the same. %s there lia!ility for donors taxF
- 6o donors tax !ecause as if A never inherited anything from
A and the transfer was made directly from A to B and 0.
8A47E A!!E! TAX
A 8a2'e Added Tax
- %ndirect &ax
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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- %t is not the tax itself which is shifted or passed !ut it is the
!urden to pay the tax
IhyF &ax is *ersonal. .eller is still lia!le, only that the
economic !urden is shouldered !y the !uyer.
B Transa+"ions S'0*e+" "o 8AT 6ISBE4-
a. I:)or"a"ion H whether or not in the regular course of
!usiness
!. Sa2e
conducted in the
c. Bar"er
regular course
d. Ex+#an3e of !usiness
e 4ease
> &he phrase "in the course of !usiness# means the regular conduct
or pursuit of a commercial or an economic activity, including
transactions incidental thereto, !y any person regardless of whether
or not the person engaged therein is a non-stoc4, non-profit private
organi7ation (irrespective of the disposition of its net income and
whether or not it sells exclusively to mem!ers or their guests+, or
government entity.
M ;A& !ecomes due when the following conditioned concur:
a. &here is sale, !arter, exchange, transfer or similar
transactions, either for nominal or valua!le consideration,
intended to transfer ownership of, or title to, articles imported,
milled, produced or manufactured and
!. &he sale is consummated, not merely perfected, in the
*hilippines. &he place where the title to the thing passes
determines the place of delivery or tax situs.
C S)e+ifi+ C#ara+"eris"i+s of 8AT
a Cons':)"ion Based Tax
- the person who last consumes the product a!sor!s
the effect of ;A&
1. /estination *rinciple
- Koods are destined to !e consumed in the
*hilippines
3. 0ross-!order principle
- Koods going out of the *hilippines shall not !e
su!'ected to tax since these goods are not destined
to !e consumed in the *hils.
M;A& is imposed only on whatever value was added.
! Exe:)" Transa+"ions 6Se+ 109C NIRCC as a:ended
0/ RA 9;;A-
E Nero ra"in3 .s Exe:)"ion
a. A 7ero-rated scale is taxa!le transaction, !ut does not
result in an output tax while an exempted transaction
is not su!'ect to the output tax
!. &he input ;A& on the purchases of ;A&-registered
person with 7ero-rated sales may !e allowed as tax
credits or refunded while the seller in an exempt
transaction is not entitled to any input tax on his
purchases despite the issuance of a ;A& invoice or
receipt and
c. *ersons engaged in transactions which are 7ero-rated,
!eing su!'ect to ;A&, are re$uired to register while
registration is option for ;A&-exempt persons.
F Tax Credi"s
a. Transi"iona2 In)'" Tax Credi"s 6.ec. 111(A+,
6%)0, as amended !y )A @55>-
!. (res':)"i.e In)'" Tax Credi"s 6.ec. 111(B+,
6%)0, as amended !y )A @55>-
TAX A!MINISTRATION AN! ENFORCEMENT
A Tax Ad:inis"ra"ion, I"s 3enera2 +on+e)"s
- is the power of the Bureau of %nternal
)evenue (B%)+ to enforced and administer
taxes.
B %o.ern:en" a3en+ies in.o2.ed in "ax
ad:inis"ra"ion
- the B%) and Bureau of 0ustoms are tas4ed
to implement revenues laws as the case
may !e.

C T#e B'rea' of In"erna2 Re.en'e
a Co:)osi"ion F'n+"ions
- &he Bureau of %nternal )evenue shall have
a chief to !e 4nown as 0ommissioner of
%nternal )evenue, hereinafter referred to as
the 0ommissioner and four (C+ assistant
chiefs to !e 4nown as /eputy
0ommissioners. (.ec. 5, 6%)0+
0 (o5ers and !'"ies
i. %n general
- &he Bureau of %nternal )evenue shall !e
under the supervision and control of the
/epartment of ,inance and its powers and
duties shall comprehend the assessment
and collection of all national internal
revenue taxes, fees, and charges, and the
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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REVIEW NOTES FOR TAXATION 2 18
enforcement of all forfeitures, penalties,
and fines connected therewith, including
the execution of 'udgments in all cases
decided in its favor !y the 0ourt of &ax
Appeals and the ordinary courts. &he
Bureau shall give effect to and administer
the supervisory and police powers
conferred to it !y this 0ode or other laws.
(Se+ 2C NIRC-
ii. .pecific
1 In"er)re" "ax 2a5s and de+ide
+ases 6Se+=C NIRC-
- &he power to interpret the provisions of
this 0ode and other tax laws shall !e under
the exclusive and original 'urisdiction of the
0ommissioner, su!'ect to review !y the
.ecretary of ,inance.
&he power to decide disputed assessments,
refunds of internal revenue taxes, fees or
other charges, penalties imposed in relation
thereto, or other matters arising under this
0ode or other laws or portions thereof
administered !y the Bureau of %nternal
)evenue is vested in the 0ommissioner,
su!'ect to the exclusive appellate
'urisdiction of the 0ourt of &ax Appeals.
a. B%) %ssuances and rules
relevant thereto
&he power to issue regulations is
expressly conferred in the &ax
0ode. &hus, the .ecretary of
,inance, upon the recommendation
of the 0ommissioner, shall
promulgate all needful rules and
regulations for the effective
enforcement of the provisions of
the &ax 0ode. (see .ec.3CC,
6%)0+. &he rules and regulations
of the Bureau shall contain, among
others, provisions specifying,
prescri!ing or defining the time and
manner of canvassing revenue
regions, form of la!els, conditions
to !e o!served !y revenue officers
respecting the institutions and
conduct of legal actions. (see
.ec.3C9, 6%)0+
- the Bureau has the power to issue rules and
issuances as the case may !e !ut su!'ect to
the following rule:
SEC 2=@ Non-Retroactivity of Rulings. -
Any revocation, modification or reversal of any of
the rules and regulations promulgated in accordance
with the preceding .ections or any of the rulings or
circulars promulgated !y the 0ommissioner shall not
!e given retroactive application if the revocation,
modification or reversal will !e pre'udicial to the
taxpayers, except in the following cases:
(a+ Ihere the taxpayer deli!erately misstates or
omits material facts from his return or any document
re$uired of him !y the Bureau of %nternal )evenue
(!+ Ihere the facts su!se$uently gathered !y the
Bureau of %nternal )evenue are materially different
from the facts on which the ruling is !ased or
(c+ Ihere the taxpayer acted in !ad faith.
2 Exa:ina"ion of BooBs of A++o'n"s
6Se+ ?C NIRC-
- the Bureau has the power to examine
!oo4s of accounts of every person
(taxpayer+ engaged in a !usiness
a. however !efore a tax official
could in$uire into said !oo4s of
accounts a letter of authority is
re$uired.

!. Ihat is "third-party verification
rule#F
- %n ascertaining the correctness of any return,
or in ma4ing a return when none has !een made,
or in determining the lia!ility of any person for
any internal revenue tax, or in collecting any
such lia!ility, or in evaluating tax compliance,
the 0ommissioner is authori7ed to o!tain on a
regular !asis from any person other than the
person whose internal revenue tax lia!ility is
su!'ect to audit or investigation, or from any
office or officer of the national and local
governments, government agencies and
instrumentalities, including the Bang4o .entral
ng *ilipinas and government-owned or
-controlled corporations, any information such
as, !ut not limited to, costs and volume of
production, receipts or sales and gross incomes
of taxpayers, and the names, addresses, and
financial statements of corporations, mutual fund
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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REVIEW NOTES FOR TAXATION 2 1@
companies, insurance companies, regional
operating head$uarters of multinational
companies, 'oint accounts, associations, 'oint
ventures of consortia and registered partnerships,
and their mem!ers
c. %n$uiry into !an4 deposits (.ec ? RfS+,
6%)0+
%enera2 R'2e,
&he Bureau of %nternal )evenue has no
power to in$uire into the !an4 deposits of a
person or taxpayer.
Ex+e)"ions,
6otwithstanding any contrary provision of
)epu!lic Act 6o. 1C<9 and other general or special
laws, the 0ommissioner is here!y authori7ed to
in$uire into the !an4 deposits of:

1+ a decedent to determine his gross estate
and
(3+ any taxpayer who has filed an
application for compromise of his tax lia!ility under
.ec. 3<C (A+ (3+ of this 0ode !y reason of financial
incapacity to pay his tax lia!ility.
%n case a taxpayer files an application to compromise
the payment of his tax lia!ilities on his claim that his financial
position demonstrates a clear ina!ility to pay the tax assessed,
his application shall not !e considered unless and until he
waives in writing his privilege under )epu!lic Act 6o. 1C<9
or under other general or special laws, and such waiver shall
constitute the authority of the 0ommissioner to in$uire into
the !an4 deposits of the taxpayer.
.uch limited power of the 0ommissioner does not
conflict with ).A 1C<9 or the .ecrecy of Ban4 /eposits =aw
!ecause the provisions of the &ax 0ode granting this power
are an exception to the said legislation.
%f the !an4 has 4nowledge of the death of a person,
who maintained a !an4 deposit account either alone or 'ointly
with another, it shall not allow any withdrawal from the said
deposit account, unless the 0ommissioner has certified that the
transfer taxes imposed thereon have !een paid. Dowever the
administrator of the estate or any one of the heirs of the
decedent may, upon authori7ation !y the 0ommissioner,
withdraw an amount not exceeding twenty thousand pesos
(*3<, <<<.<<+ without the certification. ,or this purpose all
withdrawal slips shall contain a statement to the effect that all
of the 'oint depositors are still living at the time of withdrawal
!y any one of the 'oint depositors and such statement shall !e
under oath !y the said depositors.
d. .ummons persons, ta4e testimony
%n ascertaining the correctness of any return, or in
ma4ing a return when none has !een made, or in determining
the lia!ility of any person for any internal revenue tax, or in
collecting any such lia!ility, or in evaluating tax compliance,
the 0ommissioner is authori7ed:
1. &o summon the person lia!le for tax or re$uired to
file a return, or any officer or employee of such person, or any
person having possession, custody, or care of the !oo4s of
accounts and other accounting records containing entries
relating to the !usiness of the person lia!le for tax, or any
other person, to appear !efore the 0ommissioner or his duly
authori7ed representative at a time and place specified in the
summons and to produce such !oo4s, papers, records, or other
data, and to give testimony (.ec.9 RcS, 6%)0+
3. &o ta4e such testimony of the person concerned,
under oath, as may !e relevant or material to such in$uiry
(.ec.9 RdS, 6%)0+
- &o summon the person lia!le for tax or
re$uired to file a return, or any officer or employee of such
person, or any person having possession, custody, or care of
the !oo4s of accounts and other accounting records containing
entries relating to the !usiness of the person lia!le for tax, or
any other person, to appear !efore the 0ommissioner or his
duly authori7ed representative at a time and place specified in
the summons and to produce such !oo4s, papers, records, or
other data, and to give testimony.
5. *ower to assess and prescri!e re$uirements for tax
administration
a (o5er "o exa:ine re"'rns 6Se+ @ OaPC
NIRC-
- After a return has !een filed as
re$uired under the provisions of this 0ode,
the 0ommissioner or his duly authori7ed
representative may authori7e the
examination of any taxpayer and the
assessment of the correct amount of tax:
Pro#ided, ho+e#er1 &hat failure to file a
return shall not prevent the 0ommissioner
from authori7ing the examination of any
taxpayer.
Any return, statement of
declaration filed in any office authori7ed to
receive the same shall not !e withdrawn:
Pro#ided, That within three (5+ years from
the date of such filing, the same may !e
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
B A
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REVIEW NOTES FOR TAXATION 2 3<
modified, changed, or amended: Pro#ided,
further, &hat no notice for audit or
investigation of such return, statement or
declaration has in the meantime !een
actually served upon the taxpayer.
i. Amendment of )eturns
Ihen a report re$uired !y law as a
!asis for the assessment of any national
internal revenue tax shall not !e forthcoming
within the time fixed !y laws or rules and
regulations or when there is reason to
!elieve that any such report is false,
incomplete or erroneous, the 0ommissioner
shall assess the proper tax on the !est
evidence o!taina!le.
%n case a person fails to file a
re$uired return or other document at the
time prescri!ed !y law, or willfully or
otherwise files a false or fraudulent return
or other document, the 0ommissioner shall
ma4e or amend the return from his own
4nowledge and from such information as
he can o!tain through testimony or
otherwise, which shall !e prima facie
correct and sufficient for all legal purposes.
(.ec. ? R!S, 6%)0+
ii. )ule on confidentiality of tax
returns and exceptions thereto
(.ec.>1 and 3><, 6%)0+
- After the assessment shall have
!een made, as provided in this &itle, the
returns, together with any corrections
thereof which may have !een made !y the
0ommissioner, shall !e filed in the 1ffice of
the 0ommissioner and shall constitute
pu!lic records and !e open to inspection as
such upon the order of the *resident of the
*hilippines, under rules and regulations to
!e prescri!ed !y the .ecretary of ,inance,
upon recommendation of the 0ommissioner.
&he 0ommissioner may, in each
year, cause to !e prepared and pu!lished in
any newspaper the lists containing the
names and addresses of persons who have
filed income tax returns. (see .ec.>1, 6%)0+
Any internal revenue officer who is
or shall !ecome interested, directly or
indirectly, in the manufacture, sale or
importation of any article su!'ect to excise
tax under &itle ;% of this 0ode or in the
manufacture or repair or sale, of any die for
printing, or ma4ing of stamps, or la!els shall
upon conviction for each act or omission, !e
punished !y a fine of not less than ,ive
thousand pesos (*9,<<<+ !ut not more than
&en thousand pesos (*1<,<<<+, or suffer
imprisonment of not less than two (3+ years
and one (1+ day !ut not more than four (C+
years, or !oth. (see .ec.3><, 6%)0+
0 (o5er "o :aBe a re"'rns 6Se+@ O0PC
NIRC-
Ihat is "Best -vidence
1!taina!le )ule#F
- %n case a person fails to file a re$uired
return or other document at the time
prescri!ed !y law, or willfully or otherwise
files a false or fraudulent return or other
document, the 0ommissioner shall ma4e or
amend the return from his own 4nowledge
and from such information as he can o!tain
through testimony or otherwise, which
shall !e prima facie correct and sufficient
for all legal purposes.
+ (o5er "o +ond'+" in.en"or/ "aBin3C
s'r.ei22an+e and "o iss'e )res':)"i.e
3ross sa2es$re+ei)"s 6see Se+@ O+PC
NIRC-
- &he 0ommissioner may, at any time during
the taxa!le year, order inventory-ta4ing of goods of
any taxpayer as a !asis for determining his internal
revenue tax lia!ilities, or may place the !usiness
operations of any person, natural or 'uridical, under
o!servation or surveillance if there is reason to
!elieve that such person is not declaring his correct
income, sales or receipts for internal revenue tax
purposes. &he findings may !e used as the !asis for
assessing the taxes for the other months or $uarters of
the same or different taxa!le years and such
assessment shall !e deemed prima facie correct.

Ihen it is found that a person has failed to
issue receipts and invoices in violation of the
re$uirements of .ections 115 and 35> of the &ax
0ode, or when there is reason to !elieve that the
!oo4s of accounts or other records do not correctly
reflect the declarations made or to !e made in a
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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REVIEW NOTES FOR TAXATION 2 31
return re$uired to !e filed under the provisions of this
0ode, the 0ommissioner, after ta4ing into account
the sales, receipts, income or other taxa!le !ase of
other persons engaged in similar !usinesses under
similar situations or circumstances or after
considering other relevant information may prescri!e
a minimum amount of such gross receipts, sales and
taxa!le !ase, and such amount so prescri!ed shall !e
prima facie correct for purposes of determining the
internal revenue tax lia!ilities of such person.
d (o5er "o "er:ina"e "ax )eriod 6see
Se+ @ OdP-C NIRC-
- Ihen it shall come to the 4nowledge of
the 0ommissioner that a taxpayer is
retiring from !usiness su!'ect to tax, or is
intending to leave the *hilippines or to
remove his property therefore or to hide or
conceal his property, or is performing any
act tending to o!struct the proceedings for
the collection of the tax for the past or
current $uarter or year or to render the
same totally or partly ineffective unless
such proceedings are !egun immediately,
the 0ommissioner shall declare the tax
period of such taxpayer terminated at any
time and shall send the taxpayer a notice of
such decision, together with a re$uest for
the immediate payment of the tax for the
period so declared terminated and the tax
for the preceding year or $uarter, or such
portion thereof as may !e unpaid, and said
taxes shall !e due and paya!le immediately
and shall !e su!'ect to all the penalties
hereafter prescri!ed, unless paid within the
time fixed in the demand made !y the
0ommissioner.
- the B%) has the power to terminate tax
period under the following instances:
when the taxpayer conceals his
properties with the intention to evade
taxes
when the taxpayer is leaving the
*hilippines with the intention to
evade taxes
when the taxpayer is o!structing
proceedings for the collection of
taxes
when the taxpayer is removing
properties with the intention of
evading taxes
when the taxpayer is retiring form
!usiness
e (o5er "o fix rea2 )ro)er"/ .a2'es 6see
Se+@ OePC NIRC-
- &he 0ommissioner is authori7ed to divide
the *hilippines into different 7ones or areas
and shall, upon consultation with competent
appraisers !oth from the private and pu!lic
sectors, determine the fair mar4et value of
real properties located in each 7one or area.
,or purposes of computing any internal
revenue tax, the value of the property shall
!e whichever the higher is of:
(1+ &he fair mar4et value as
determined !y the 0ommissioner, or
(3+ &he fair mar4et value as shown
in the schedule of values of the
*rovincial and 0ity Assessors.
f (o5er "o a++redi" "ax a3en"s 6see Se+@
O3PC NIRC-
- &he 0ommissioner shall accredit and
register, !ased on their professional
competence, integrity and moral fitness,
individuals and general professional
partnerships and their representatives who
prepare and file tax returns, statements,
reports, protests, and other papers with or
who appear !efore, the Bureau for
taxpayers. Iithin one hundred twenty
(13<+ days from Nanuary 1, 1@@8, the
0ommissioner shall create national and
regional accreditation !oards, the mem!ers
of which shall serve for three (5+ years,
and shall designate from among the senior
officials of the Bureau, one (1+ chairman
and two (3+ mem!ers for each !oard,
su!'ect to such rules and regulations as the
.ecretary of ,inance shall promulgate
upon the recommendation of the
0ommissioner.
%ndividuals and general professional
partnerships and their representatives who
are denied accreditation !y the
0ommissioner andLor the national and
regional accreditation !oards may appeal
such denial to the .ecretary of ,inance,
who shall rule on the appeal within sixty
(?<+ days from receipt of such appeal.
,ailure of the .ecretary of ,inance to rule
on the Appeal within the prescri!ed period
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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shall !e deemed as approval of the
application for accreditation of the
appellant.
3 (o5er "o )res+ri0e
)ro+ed'ra2$do+':en"ar/ reE'ire:en"s
- the B%) has the power to prescri!e the
manner of filing of a returns
# (o5er "o de2e3a"e 6see Se+AC NIRC-
- &he 0ommissioner may delegate the
powers vested in him under the pertinent
provisions of the &ax 0ode to any or such
su!ordinate officials with the ran4
e$uivalent to a division chief or higher,
su!'ect to such limitations and restrictions
as may !e imposed under rules and
regulations to !e promulgated !y the
.ecretary of finance, upon
recommendation of the 0ommissioner:
Pro#ided, ho+e#er, &hat the following
powers of the 0ommissioner shall not !e
delegated:
(a+ &he power to recommend the
promulgation of rules and regulations !y the
.ecretary of ,inance
(!+ &he power to issue rulings of first
impression or to reverse, revo4e or modify
any existing ruling of the Bureau
(c+ &he power to compromise or a!ate,
under .ec. 3<C (A+ and (B+ of this 0ode, any
tax lia!ility: Pro#ided, ho+e#er, &hat
assessments issued !y the regional offices
involving !asic deficiency taxes of ,ive
hundred thousand pesos (*9<<,<<<+ or less,
and minor criminal violations, as may !e
determined !y rules and regulations to !e
promulgated !y the .ecretary of finance,
upon recommendation of the 0ommissioner,
discovered !y regional and district officials,
may !e compromised !y a regional
evaluation !oard which shall !e composed
of the )egional /irector as 0hairman, the
Assistant )egional /irector, the heads of the
=egal, Assessment and 0ollection /ivisions
and the )evenue /istrict 1fficer having
'urisdiction over the taxpayer, as mem!ers
(d+ &he power to assign or reassign internal
revenue officers to esta!lishments where
articles su!'ect to excise tax are produced or
4ept.
i Non-de2e3a02e )o5ers in re2a"ion "o
Se+"ion 1@ of NIRC
- the following are the powers which the
Bureau of %nternal )evenue cannot
delegate:
a "#e )o5er "o +o:)ro:ise
- as a general rule the power of the B%) to
compromise cannot !e delegated to other
administrative agencies unless in the
following grounds:
1. a reasona!le dou!t as to
the validity of the claim
against the taxpayer
exists
3. financial ina!ility to pay
&he compromise settlement of any tax lia!ility shall
!e su!'ect to the following minimum accounts:
a. ,or cases of financial ina!ility to pay, a
minimum compromise rate e$uivalent to ten
per cent (1<:+ of the !asic tax assessed
!. ,or other cases, a minimum compromise
rate e$uivalent to forty percent (C<:+ of the
!asic tax assessed.
Ihere the !asic tax involved exceeds 1ne million
pesos (* 1,<<<,<<<.<<+ or where the settlement
offered is less than the prescri!ed minimum rates, the
compromise shall !e su!'ect to the approval of the
-valuation Board which shall !e composed of the
0ommissioner and the /eputy 0ommissioners.
All criminal violations may !e compromised except
those
a. those already filed in court
!. those involving fraud (see .ec.
3<C RaS, 6%)0+
&he taxpayers offer to compromise shall
not !e considered, unless and until he
waives in writing his privilege under )A
1C<9 or under other general or special laws,
and such waiver shall constitute the
authority of the 0ommissioner to in$uire
into his !an4 deposits. (see .ec. ? RfS,
6%)0+
0 )o5er "o a0a"e
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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&he B%) may a!ate or cancel tax lia!ility
when:
a. the tax or any portion thereof
appears to !e un'ustly or
excessively assessed
!. the administration and
collection costs involved do
not 'ustify the collection of the
amount due
&he power to compromise or a!ate shall not !e
delegated !y the 0ommissioner, except in the
following cases
a. assessments issued !y the
regional offices involving
!asic taxes of
* 9<<,<<<.<< or less
!. Einor criminal violations.
&hese cases may !e
compromised !y the regional
evaluation !oard. (see .ec.>,
6%)0+
i. -nforcement of police power (see
.ec.19, 6%)0+
&he 0ommissioner, the /eputy 0ommissioners, the
)evenue )egional /irectors, the )evenue /istrict
1fficers and other internal revenue officers shall have
authority to ma4e arrests and sei7ures for the
violation of any penal law, rule or regulation
administered !y the Bureau of %nternal )evenue. Any
person so arrested shall !e forthwith !rought !efore a
court, there to !e dealt with according to law.
'. Authority to A!ate and 0ompromise
&ax =ia!ilities (see .ec.? RfSR3S, 3<C in
relation to )ev. )egs.5<-3<<3 as
amended !y )) 6o.8-3<<C+
SEC 20= Authority of the Commissioner to
Compromise, Abate and Refund or Credit Taxes. -
&he 0ommissioner may -
6A- Co:)ro:ise "#e (a/:en" of an/ In"erna2
Re.en'e TaxC 5#en,
(1+ A reasona!le dou!t as to the validity of
the claim against the taxpayer exists or
(3+ &he financial position of the taxpayer
demonstrates a clear ina!ility to pay the
assessed tax.
&he compromise settlement of any tax
lia!ility shall !e su!'ect to the following
minimum amounts:
,or cases of financial incapacity, a
minimum compromise rate
e$uivalent to ten percent (1<:+ of
the !asic assessed tax and
,or other cases, a
minimum compromise rate
e$uivalent to forty percent (C<:+
of the !asic assessed tax.
Ihere the !asic tax involved exceeds 1ne million pesos
(*1,<<<.<<<+ or where the settlement offered is less than the
prescri!ed minimum rates, the compromise shall !e su!'ect to
the approval of the -valuation Board which shall !e composed
of the 0ommissioner and the four (C+ /eputy 0ommissioners.
6B- A0a"e or Can+e2 a Tax 4ia0i2i"/C 5#en,
(1+ &he tax or any portion thereof appears
to !e un'ustly or excessively assessed or
(3+ &he administration and collection costs
involved do not 'ustify the collection of the
amount due.
All criminal violations may !e
compromised except: (a+ those already filed
in court, or (!+ those involving fraud.
! T#e r'2e on es"o))e2 in re2a"ion "o "ax
ad:inis"ra"ion
a. Against the government
&he error made !y a tax official in the assessment of his tax
lia!ilities does not have the effect of relieving the taxpayer
from the o!ligation to pay the full amount of his tax lia!ility,
for taxes are fixed !y law and the government is never
estopped to collect the legitimate taxes !ecause of the errors
committed !y its agents. Dowever, li4e other principles, the
principle of estoppel also admits exceptions in the interest of
'ustice and fair play. &he 0ommissioner is precluded from
adopting a position inconsistent with one previously ta4en
where in 'ustice would result therefore or where there has !een
a misrepresentation.
Any mista4es committed !y the
agents of the sovereign, namely government officials and
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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employees are their own and cannot !ind the government,
which cannot !e placed on estoppel on account of the mista4es
of its agents.
!. Against the taxpayer
E Assess:en"s and i"s 3o.ernin3 )rin+i)2es
a !efini"ion
&he notice and demand for payment of a tax lia!ility
should not !e confused with assessment relative to
real property taxation which refers to the listing and
evaluation of taxa!le real property.
0 1#a" +ons"i"'"es an assess:en"
i CIR . (as+or Rea2"/C 29 F'ne 1999
6either the 6%)0 nor the revenue regulations
governing the protest of assessments provide a
specific definition of form of an assessment however
the 6%)0 defines the specific function and effects of
an assessment:
An assessment must !e sent to and received !y a
tax payer, and must demand payment of the taxes
descri!ed therein within a specific period.
%ssuance of an assessment is vital in determining
the period of limitation regarding its proper
issuance and the period within which to protest.
An assessment is deemed made only when the
collector of %nternal )evenue releases or mails or
sends such notice to the tax payer.
An assessment is not necessary !efore acriminal
charge can !e filed.
Before an assessment is issued, there is !y practice,
a pre-assessment notice sent to the tax payer.&he
tax *ayer is then given a chance to su!mit position
papers and documents to prove that the assessment
is unwarranted. %f the commissioner is unsatisfied,
an assessment signed !y himLher is then sent to the
tax payer informing the latter specifically and
clearly that an assessment has !een made against
himLher. %n contrast, the criminal charge need not
go through all this.
ii CIR . Re/esC %R No 1?9@9=C Fan'ar/ 2AC
200@
&ax payers shall !e informed in writing of the law
and the facts on which the assessment and the
assessment is made otherwise the assessment shall
!e void. (3
nd
paragraph of section 338 is clear and
mandatory+
+ Kinds of Assess:en"
d S"a"'"e of 4i:i"a"ion on Assess:en" of In"erna2
Re.en'e Taxes 6Se+"ions 20;C 222C NIRC-
Keneral rule (sec3<5+
%nternal revenue taxes shall !e assessed within three
years after the last day prescri!ed for the filing of the
return, and no proceeding in court without
assessment for the collection of sluch taxes shall
!egun after the expiration of such period.
-xceptions (sec.333+
%n the case of a false of fraudulent return with intent
to evade tax or of failure to file a return, the tax
collection may !e filed without an assessment at any
time within ten years after the discovery of the
falsity, fraud or omission:
%f !efore the expiration of the time prescri!ed in the
tax codes for the assessment of the tax, !oth the
commissioner and the taxpayer have agreed in
writing to its assessment after such time, the tax may
!e assessed within the period agreed upon.
i RMO 20-90C (#i2i))ine Fo'rna2is" In+C . CIRC
%R No 1@28?2C 1@ !e+e:0er 200=
Appellate Nurisdiction of the 0&A is not limited to
cases which involve decisions of the 0%) on matters
relating to assessments or refunds. &he second part of
the provision covers other cases that arise out of the
6%)0 or related laws and administered !y the B%).
&he wording of the provision is clear and simple. %t
gives the 0&A the Nurisdiction to determine if the
warrant of distraint and levy issued !y the B%) is
valid and to rule if the waiver of stature of limitations
was validly effected.
A waiver of the statute of limitations under the
6%)0, to a certain extent, is a derogation of the
taxpayers right to security against prolonged and
unscrupulous investigations and must therefore !e
carefully and strictly construed. &he waiver of the
statute of limitations is not a waiver of the right to
invo4e the defense of prescription as erroneously
held !y the 0A. %t is an agreement !etween the
taxpayer and the B%) that the period to issue an
assessment and collect the taxes due id extended to a
date certain.
&he waiver does not mean that the taxpayer
relin$uishes the right to invo4e prescription
une$uivocally particularly where the language of the
document is e$uivocal. ,or the purpose of
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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safeguarding taxpayers from any unreasona!le
examination, investigation or assessment, out tax law
provides a statute of limitation in collection of taxes.
&hus the law on prescription, !eing a remedial
measure should !e li!erally construed in order to
afford such protectionL
ii CIR . CA and Carna"ionC % R No 11?A12C 2?
Fe0r'ar/ 1999
,inality of findings of facts as a matter of principle,
this court will not set aside the conclusion reached !y
an agency such as the 0&A unless there has !een an
a!use or improvident exercise of authority. By the
very nature of its function, dedicated exclusively to
the study and consideration of tax pro!lems and has
necessarily developed an expertise of the su!'ect.
e Ins"an+es 5#ere "#e r'nnin3 of "#e )res+ri)"i.e
)eriod is s's)ended 6se+"ion 22;-
i Re)'02i+ . &iMonC 1; !e+e:0er 1999
.ec. 33@ of the code mandates that a re$uest for
reconsideration must !e made within thirty (5<+ days
from the tax payers receipt of tax deficiency
assessment, otherwise the assessment !ecomes final,
unappeala!le and, therefore, demanda!le. &he notice
of assessment for respondents tax deficiency was
issued !y petitioner on Nuly 18, 1@8?. 1n the other
hand, respondent made her re$uest for
reconsideration thereof only on 6ovem!er 5. 1@@3,
without stating when she received the notice of tax
assessment. .he explained that she was constrained
to as4 for a reconsideration in order to avoid the
harrrasment of B%) collectors. %n all li4elihood, she
must have !een referring to the distraint and levy of
her properties !y petitioners agents which too4 place
of Nanuary 13, 1@8@. -ven assuming that she first
learned of the deficiency assessment on this date her
re$uest for reconsideration was nonetheless filed late
since she made it more than 5< days thereafter.
Dence, her re$uest for reconsideration did not
suspend the running for the prescriptive period
provided under section 335. Although the
commissioner acted on her re$uest !y eventually
denying it on August 11, 1@@C, this is of no moment
and does not distract from the fact that the assessment
had !ecome demanda!le
ii B(I . CIRC %R No 1;9A;@C 1A O+"o0er 200?
&he court had consistently ruled in a num!er of cases
that a re$uest for reconsideration !y the tax payer
without a valid waiver of the prescriptive period for
the assessment and collection of tax, as re$uired !y
the tax code and implementing rules, will not suspend
the running thereof. (-xception: section 33C+
Iherein the statute of limitations on assessment and
collection of taxes is considered suspended, when the
tax payer re$uest for a reinvestigation which is
granted !y the commissioner.
f (ro+ed're in "#e )ro+ess of assess:en" 6Se+"ion 228-
i Es"a"e of "#e 4a"e F'2iana !ieM 8da !e %a0rie2
. CIRC %R No 1???=1C Fan'ar/ 2AC 200=
&he rule that an assessment is deemed made for the
purpose of giving effect to such assessment when the
notice is released, mailed or sent to the taxpayer to
effectuate the assessment re$uires that the notice
must !e sent to the taxpayer, and not merely to a
disinterested party. Although there is no specific
re$uirement that the taxpayer should receive that
notice within the said period, due process re$uires at
the very least that such notice actually !e received.
Ihen an estate is under administration, notice must
!e sent to the administrator of the estate.
ii CIR . Re/esC %R No 1?9@9=C Fan'ar/ 2AC
200@
&he tax payers shall !e informed in writing of the law
and facts on which the assessment is made otherwise
the assessment itself is void.
iii CIR . B(IC %R No 1;=0@2C 1AC A)ri2 200A
&he inevita!le conclusion is that B*%s failure to
protest the assessments within the 5<-day period
provided in the former section 3>< meant that they
!ecame final and unappeala!le. &hus, the 0&A
correctly dismissed B*%s appeal for lac4 of
'urisdiction. B*% was, from then on !arred from
disputing the correctness of the assessments or
invo4ing any defense that would reopen the $uestion
of its lia!ility on the merits. 6ot only that. &here
arose a presumption of correctness when B*% failed
to protest the assessments: &ax assessments !y tax
examiners are presumed correct and made in good
faith. &he taxpayer has the duty to prove otherwise.
%n the a!sence of proof of any irregularities in the
performance of duties, an assessment duly made !y a
B%) examiner and approved !y his superior offices
will not !e distur!ed. All presumptions are in favor
of the correctness of tax assessments.
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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i. (NOC . Co'r" of A))ea2sC %R NoC 1099A@C
A)ri2 2@C 200?
&he defense of prescription of the period for the
assessment and collection of tax lia!ilities shall !e
deemed waived when such defense was not properly
pleaded and the facts alleged and evidenced
su!mitted !y the parties were not sufficient to
support a finding !y the supreme court on the matter
2 prescription, !eing a matter of defense, imposes the
!urden on the taxpayer to prove that the full period of
the limitation has expired, and this re$uires him to
positively esta!lish the date when the period started
running and when the same was fully accomplished.
3 Ins"an+es 5#en )re-assess:en" is no" reE'ired
6Se+"ion 228-
A preassessment notice shall not !e re$uired in the
following cases:
Ihen any tax deficiency is the result of
mathematical error in the computation of the
tax as appearing on the face of the return.
Ihen a discrepancy has !een determined
!etween the tax withheld and the amount
actually remitted !y the withholding agent.
Ihen a taxpayer who opted to claim a refund
or tax credit of excess credita!le withholding
tax for a taxa!le period was determined to
have carried over and automatically applied
the same amount claimed against the estimated
tax lia!ilities for the taxa!le $uarter or $uarters
of the succeeding taxa!le year.
Ihen the excise tax due on excisea!le articles
has not !een paid.
Ihen the article locally purchased or imported
!y an exempt person has !een sold, traded, or
transferred to non-exempt persons.
# %o.ernin3 )rin+i)2es +on+ernin3 assess:en"
%n'unction is not availa!le to restrain the collection of
internal revenue taxes.
-xception: the 0ourt of Appeals may issue
in'unctions against administrative collection, when
collection could 'eopardi7e the interest of the
Kovernment or taxpayer.
i 1#en do 5e re+Bon "#e )eriod 5#en "#e assess:en"
5as :adeD
%nternal revenue taxes shall !e assessed within three
years after the last day prescri!ed !y law for the
filing of the return.
%n case where a return is filed !eyond the three year
period shall !e counted form the day the return was
filed.
* Is assess:en" ne+essar/ 0efore a "ax)a/er +o'2d 0e
)rose+'"ed for .io2a"ion of "#e NIRCD
i 7n3a0 . C'siC Ma/ ;0C 1980
Ihat is involved here is not collection of taxes where
the assessment of the commissioner of internal
revenue may !e reviewed !y the court of tax appeals,
!ut a criminal prosecution for violations of the 6%)0
which is within the recogni7ance of the 0,%. Ihile
there can !e no civil action to enforce collection
!efore the assessment procedures provided in the
code have !een followed, there is no re$uirement for
the precise computation and assessment of the tax
!efore there can !e a criminal prosecution under the
code.
ii CIR . CAC %R No 119;22C = F'ne 199@
)eading Unga! carefully, the pronouncement therein
that deficiency assessment is not necessary prior to
prosecution is pointedly and deli!erately $ualified !y
the 0ourt with following statement $uoted form
Ku7i4 v. U. ..: "the crime is complete when the
violator has 4nowingly and willfully filed a
fraudulent return with intent to evade and defeat a
part or all of the tax.# %n plain words, for criminal
prosecution to proceed !efore assessment, there must
!e a prima facie showing of willful attempt to evade
taxes. &here was willful attempt to evade tax in
Unga! !ecause of the taxpayers failure to declare in
his income tax return "his income derived from
!anana saplings.# %n the mind of the trial court and
the 0ourt of Appeals, ,ortunes situation is $uite
apart factually since the registered wholesale price of
the goods. Approved !y the B%), is presumed to !e
the actual wholesale price, therefore, not fraudulent
and unless and until the B%) has made a final
determination of what is supposed to !e the correct
taxes, the taxpayer should not !e placed in the
cruci!le of criminal prosecution. Derein lies a whale
of difference !etween Unga! and the case at !ar.
iii CIR . (as+or Rea2"/C 29 F'ne 1999
&he issuance of an assessment is vital in determining
the period of limitation regarding its proper issuance
and the period within which to protest it. .ection 3<5
of 6%)0 provides that internal revenue taxes must !e
assessed within three years from the last day within
which to file the return. .ection 333, on the other
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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REVIEW NOTES FOR TAXATION 2 3>
hand, specifies a period of ten years in case a
fraudulent return with intent to evade was su!mitted
or in case of failure to file a return. Also, .ection 338
of the same law states that said assessment may !e
protested only within thirty days from receipt thereof.
6ecessarily, the taxpayer must !e certain that a
specific document constitutes an assessment.
1therwise, confusion would arise regarding the
period within which t ma4e an assessment or to
protest the same, or whether interest and penalty may
accrue thereon.

B Are "#e )ro+ed'res o'"2ined in Se+"ion 228 of "#e NIRC
re"roa+"i.eD
i CIR . Re/esC %R No 1?9@9=C Fan'ar/ 2AC
200@
&he general rule is that statutes are prospective.
Dowever, statutes that are remedial, or that do not
create new or ta4e away vested rights, do not fall
under the general rule against the retroactive
operation of statutes. 0learly, .ection 338 provides
for the procedure in case an assessment is protested.
&he provision does not create new or ta4e away
vested rights. %n !oth instances, it can surely !e
applied retroactively. Eoreover, )A 8C3C does not
state, either expressly or !y necessary implication,
that pending actions are excepted from the operation
of section 338, or that applying it to pending
proceedings would impair vested rights.
INTERNA4 RE8EN7E TAX REME!IES
Tax Re:edies, I"s 3enera2 +on+e)"s
%mportance: &hey exist to enhance the Kovernments
tax collection efforts, they, too, come in as safeguards against
ar!itrary action. Ihile taxes are the life!lood of the
Kovernment and should !e collected without unnecessary
hindrance, such collection must nevertheless !e made in
accordance with law as any ar!itrariness will negate the very
reason or the Kovernment itself.
C2assifi+a"ion,
1. )emedies in favor of the taxpayer
A Ad:inis"ra"i.e
(1+ Before *ayment
a. ,iling of a petition or re$uest for
reconsideration or reinvestigation
(Administrative *rotest+
!. -ntering into compromise
(3+ After *ayment
a. ,iling of claim for tax refund and
!. ,iling of claim for tax credit
B F'di+ia2
(1+ 0ivil action
a. Appeal to the 0ourt of &ax Appeals
!. Action to contest forfeiture of chattel
and
c. Action for /amages
(3+ 0riminal Action
,iling of complaint against erring Bureau of
%nternal )evenue officials and employees
3. )emedies availa!le to the government
A))2i+a0i2i"/ of "#e !o+"rine Ex#a's"ion of Ad:inis"ra"i.e
Re:edies
- 6o civil or criminal action for the recovery
of taxes shall !e filed in court without the
approval of the 0ommissioner. (.ec. 33<,
6%)0+
Re:edies A.ai2a02e "o Tax)a/ers
A Before (a/:en"
1 (ro"es" 6Se+"ion 228C NIRC-
*rotest is a vital document which is a formal
declaration of resistance of the taxpayer. %t is a
repository of all arguments. %t can !e used in court in
case administrative remedies have !een exhausted. %t
is also the formal act of the taxpayer $uestioning the
official actuation of the 0%). &his is e$uivalent to a
pleading. %t may !e a:
ReE'es" for re+onsidera"ion- a plea for the
re-evaluation of an assessment on the !asis of
existin2 records +ithout need of additional e#idence.
%t may involve a $uestion of fact or law or !oth.
ReE'es" for rein.es"i3a"ion- a plea for
reinvestigation of an assessment on the !asis of
ne+l*3disco#ered or additional e#idence that a
taxpayer intends to present in the reinvestigation. %t
may also involve $uestion of fact or law or !oth.
ReE'ire:en"s of a .a2id )ro"es"
1. %n writing
2. Addressed to the 0%)
3. Eust !e accompanied !y a waiver of the .tatute of
=imitations in favor of the government
4. .tates the ,acts, applica!le law rules and
regulations and 'urisprudence on which his protest
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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REVIEW NOTES FOR TAXATION 2 38
is !ased otherwise, his protest shall !e considered
void and without force and effect on the event the
letter of protest su!mitted !y the taxpayer is
accepted
5. 0ontains the following:
1. 6ame of the taxpayer and address for the
immediate past three taxa!le years
3. 6ature of re$uest whether reinvestigation or
reconsideration specifying newly discovered
evidence that he intends to present it is a
re$uest for reinvestigation
5. &axa!le periods covered !y the assessment
C. Amounts and 4indLs of tax involved, and
Assessment 6otice 6um!er
9. /ate of receipt of assessment notice or letter of
demand
?. %temi7ed statement of the findings to which the
taxpayer agrees, if any, as a !asis for computing the tax
due, which amount should !e paid immediately upon
the filing of the protest. ,or this purpose, the protest
shall not !e deemed validly filed unless payment of the
agreed portion of the tax is paid first
>. %temi7ed schedule of the ad'ustments with which the
taxpayer does not agree
8. .tatement of facts andLor law in support of the protest
and
@. /ocumentary evidence as it may deem necessary and
relevant to support its protest to !e su!mitted within
sixty (?<+ days from the filing of the protest. %f the
taxpayer fails to comply with this re$uirement, the
assessment shall !ecome final. !Re#enue Re2ulation
4o. )-35', dated 4o#. -6, )75'.(
-ffect of a protest on the period to collect deficiency taxes:
&he prescriptive period is arrested !y the taxpayerTs re$uest
for re-examination or reinvestigation even if he has not
previously waived it (/IR #s. .*eth, 8.R. 4o. 6$-5),Sep &9,
)77)+
Fai2're of "#e BIR "o a+" 5i"#in "#e 180-da/ )eriod
%f the 0ommissioner or his duly authori7ed representative fails
to act on the taxpayers protest within 18< days from the date
of su!mission !y the taxpayer of the re$uired documents in
support of his protest, the taxpayer may appeal to the 0A
within 5< days from the lapse of the 18<-day period.
Ad:inis"ra"i.e a+"ions "aBen d'rin3 "#e 180-da/ )eriod
1. Krant of the *rotest
3. /enial of *rotest:
A !ire+" !enia2
&he decision of the 0ommissioner or his duly rep shall (a+
state the facts, applica!le law, rules and regulations or
'urisprudence on which his protest is !ased, otherwise the
protest shall !e considered void and without force and effect,
in which case the same shall not !e considered a decision a
disputed assessment and (!+ that the same is his final decision.
(sec. 5.1.9, )) 13-@@+
BIndire+" !enia2
a. 0ommissioner did not rule on the taxpayers E) of the
assessment 2 it was only when respondent received summons
on the civil action for the collection of deficiency income tax
that the period to appeal commenced to run. (0%) vs. Union
.hipping
!. )eferral !y the 0ommissioner of re$uest for reinvestigation
to the .olicitor Keneral ()epu!lic vs.=im &ian &eng .ons+
c. )eiterating the demand for immediate payment of the
deficiency tax due to taxpayers continued refusal to execute
waiver (0%) vs. Ayala .ecurities 0orp.+
d. *reliminary collection letter may serve as assessment notice
(United %ntl *ictures vs. 0%)+
A+"s of BIR Co::issioner Considered as !enia2 of (ro"es"
5#i+# ser.es as a Basis for A))ea2 "o CTA,
1. ,iling !y the B%) of a civil suit for collection of
the deficiency tax !/IR #. :nion Shippin2 /orp . )5' S/RA
'%6(
3. %ndication to the taxpayer !y the 0ommissioner in
clear and une$uivocal language of his final denial. !/IR #.
:nion Shippin2 /orp(
&. B%) demand letter reiterating his previous demand
to pay, sent to taxpayer after his protest of the assessment
!Suri2ao 0lectric /o. Inc. #. /TA, '6 S/RA '-&(
C. &he actual issuance of a warrant of distraint and
levy in certain cases cannot !e considered as final decision on
a disputed settlement (0%) v. Union .hipping 0orp+
0 Effe+" of )ro"es" fi2ed o'" of "i:e
&he pendency of the taxpayerTs appeal in the 0ourt of &ax
Appeals and in the .upreme 0ourt had the effect of
temporarily staying the hands of the said 0ommissioner. %f the
taxpayerTs stand that the pendency of the appeal did not stop
the running of the period !ecause the 0ourt of &ax Appeals
did not have 'urisdiction over the case of taxes is upheld,
taxpayers would !e encouraged to delay the payment of taxes
in the hope of ultimately avoiding the same. Under the
circumstances, the running of the prescriptive period was
suspended. /eficiency *ercentage &axes must !e imposed.
(*)1&-0&1)T. .-);%0-., %60., petitioner, vs. 0A, K.).
6o. 1181>?, 3<<< Apr 13+
Re:edies fro: a denia2 of )ro"es"
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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1. Eotion for reconsideration
3. Appeal to the 0ourt of &ax Appeals()A 1139, as amended
!y )A @383+
2. Co:)ro:ise
B Af"er (a/:en"
1. Ref'nd 6Se+"ion 229C NIRC-
&he =egal *rinciple of $uasi-contracts or solutio
indebiti !see Art. -)%- ; -)'% of the /i#il /ode(. &he
Kovernment is within the scope of the principle of solutio
indebiti. !/IR #s. <ireman=s <und Insurance /o.(
a M's" 0e s"ri+"2/ +ons"r'ed a3ains" "ax)a/er
Krounds for filing a claim for refund:
-rroneously or illegally assessed or collected internal revenue
taxes
&axpayer pays under the mista4e of fact, as for instance in a
case where he is not aware of the existing exemption in his
favor at the time payments were made.
A tax is illegally collected if payments are made under duress.
1. *enalties imposed without authority and
2. Any sum alleged to have !een excessive or in any
manner wrongfully collected.
&he value of internal revenue stamps when they are returned
in good condition !y the purchaser may also !e redeemed.
0 (eriod 5i"#in 5#i+# "o fi2e a +2ai: for ref'nd
1. Keneral )ule is two years from the date of payment
&he two-year prescriptive period provided in .ection 3@3
(now .ection 35< of the &ax 0ode should !e computed from
the time of filing the Ad'ustment )eturn or Annual %ncome
&ax )eturn and final payment of income tax.(0%) vs. &EA
.A=-., K.). 6o. 85>5?, 1@@3 Nan 19,+
&he rationale in computing the two-year prescriptive period
with respect to the petitioner corporationTs claim for refund
from the time it filed its final ad'ustment return is the fact that
it was only then that A00)A%6 could ascertain whether it
made profits or incurred losses in its !usiness operations. &he
Udate of paymentU, therefore, in A00)A%6Ts case was when
its tax lia!ility, if any, fell due upon its filing of its final
ad'ustment return. (A00)A vs 0A, K.). 6o. @?533, 1@@1
/ec 3<+
The t+o3*ear period for prescription should be counted from
the date of pa*ment of the tax, +hich for actions for refund of
corporate income tax should be computed from the time of
actual filin2 of the ad>ustment return or annual income tax
return. &his is so !ecause at that point, it can already !e
determined whether there has !een an overpayment !y the
taxpayer. Eoreover, under .ec. C@ (a+ !y the 6%)0 (now .ec.
9?(a+, 1@@> 6%)0+, payment is made at the time the return is
filed. (0%) ; 0A, 0&A, B*%, K) 6o. 11>39C. Nanuary 31,
1@@@+
&here is some li4elihood that the a!ove rule could apply also
to individuals who are self employed (i.e., in !usiness and
professional practice+ as well as estates and trusts, which are
li4ewise re$uired to file $uarterly returns.
The prescripti#e period of t+o *ears should commence to run
onl* from the time that the refund is ascertained, +hich can
onl* be determined after a final ad>ustment return is
accomplished.!0%) ; *D%=AE=%,-, 3CC .0)A CC?. Eay
3@, 1@@9+
2. In +ase of A:ended Re"'rns
3. In +ase of "ax)a/ers +on"e:)2a"in3 disso2'"ion
c. Iho has the personality to file a claim for refundF
The dut* of the +ithholdin2 a2ent to +ithhold the
correspondin2 tax arises at the time of such accrual. The
+ithholdin2 a2ent?corporation is then obli2ed to remit the tax
to the 8o#ernment since it alread* and properl* belon2s to
the 8o#ernment. %f a withholding agent who is personally
lia!le for income tax withheld at source fails to pay said
withholding tax, an assessment for said deficiency
withholding tax would, therefore, !e legal and proper.
(,%=%*%6A. .B6&D-&%0 ,%B-) 01)*. ; 0A, K)
6o.1155C>. Nune 1C, 1@@?+
d. %s setting-off of taxes against a pending claim for refund
allowedF
e. %s automatic application of excess tax credits allowedF
f. -ffect of existing tax lia!ility on a pending claim for refund
g. *eriod of validity of a tax refundLcredit
1. )eturns are not actiona!le documents for purposes of the rules
on civil procedure and evidence
h. )efund and *rotest are mutually exclusive remedies
i. %s the taxpayer entitled to claim interest on the
refunded taxF
Keneral )ule: &he Kovernment cannot !e re$uired to pay
interest on taxes refunded to the taxpayer, unless:
1. &he 0ommissioner acted with patent ar!itrariness
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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Ar!itrariness presupposes inexcusa!le or o!stinate disregard
of legal provisions. !/IR #s. @ictorias Millin2 /orp., Inc. "3
)7$96, 4o#. -7, )7$$.(
3. %n case of %ncome &ax withheld on the wages of employees
Any excess of the taxes withheld over the tax due from the
taxpayer shall !e returned or credited within 5 months from
the fifteenth (19
th
+ day of April. )efund or credit after such
time earn interest at the rate of ?: per annum, starting after
the lapse of the 5-month period to the date the refund or credit
is made !Sec 67 !c( !-( )776 4IR/
0 O"#er Re:edies
1 A+"ion "o Con"es" Forfei"'re of C#a""e2 6Se+ 2;1-
%n case of sei7ure of personal property under claim for
forfeiture, the owner desiring to contest the validity of the
forfeiture may !ring an action:
a. Before sale or destruction of the property to
recover the property from the person sei7ing the property or in
possession thereof upon filing of the proper !ond to en'oin the
sale.
!. After the sale and within ? months to
recover the net proceeds reali7ed at the sale (see. Sec. -&),
)776 4IR/(
Action parta4es the nature of an ordinary civil action for
recovery of personal property or the net proceeds of its sale
which must !e !rought in the ordinary courts and not the 0&A
2 Rede:)"ion of (ro)er"/ So2d 6Se+ 21=-
Re:edies a.ai2a02e "o "#e %o.ern:en"
A. 6o %n'unction to restrain collection of taxes
( .ec. 318, 6%)0+
K.). 6o 0ourt shall have the authority to grant an
in'unction to restrain the collection of any national
internal revenue tax, fee, or charge imposed !y the
6%)0.
-A0: 0&A may en'oin the collection of %nternal
)evenue taxes.
)-JU%.%&-.:
1. there is a pending case !efore the 0&A
(ancillary remedy, not a main cause of action+
3. identify that the collection of tax is
pre'udicial to the interest of either the &* or
government.
B. *eriod within which the government could collect
( .ecs. 3<5, 333, 6%)0+
Assessment of &ax =ia!ility
&hree (5+years from the following,
whichever comes later:
1. &he last day prescri!ed !y law for filing
the return
3. &he day when the return was actually
filed
&en (1<+ years after the discovery of the
falsity, fraud or omission in case of:
1. ,alse or fraudulent return with intent to
evade tax, or
3. ,ailure to file a return
Iithin the period agreed upon, when !oth
the &* and the 0ommissioner have agreed in
writing, !efore the expiration of the period
in .ec. 3<5 for the assessment of the tax.
CASES,
)-*UB=%0 ;. D%H16, /-0. 15, 1@@@
)evenue Adm. 1rder 6o. 1<-@9 specifically
authori7es the =itigation and *rosecution
section of the =egal /ivision of regional
district offices to institute the necessary civil
and criminal actions for tax collection. As
the complaint filed in this case was signed
!y the B%)s 0hief of =egal /ivision for
)egion C and verified !y the )egional
/irector, there was, therefore, compliance
with the law.
.ec. > of 6%)0, authori7es the B%)
0ommissioner to delegate the powers vested
in him under the pertinent provision of the
0ode to any su!ordinate official with the
ran4 e$uivalent to a division chief or higher.
0%) ;. NA;%-), NU=B 51, 1@@1
&here was no actual intentional fraud in
filing the return. *rivate respondents
notation on the tax return was at most an
error or mista4e of fact or law not
constituting fraud, an invitation for
investigation and private respondent had
literally# laid his cards on the ta!le.
*610 ;. 0A, A*)%= 3?, 3<<9
C O8ER8IE1 OF REME!IES 6SECTION 20?-
1 Tax 4ien 6Se+ 219C NIRC-
Ihen a taxpayer neglects or refuses to pay
his internal revenue tax lia!ility after
demand, the amount so demanded shall !e a
lien in favor of the government from the
time the assessment was made !y the
0ommissioner until paid with interest,
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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penalties, and costs that may secure in
addition thereto, upon all property and rights
to property !elonging to the taxpayer.
=ien shall not !e valid against any
mortgagee, purchaser or 'udgment creditor
until notice of such lien shall !e filed !y the
0ommissioner in the )egister of /eeds of
the province or city where the property of
the taxpayer is located.
A tax lien created in favor of the
government is superior to all other claims
and preferences, even to that of a private
litigant predicated on a court 'udgment.
Ex"in3'is#:en" of Tax 4ien
1. *ayment or remission of the tax
3. *rescription of the right of the government to assess
or collect.
5. ,ailure to file notice of such lien in the office of
register of /eeds, purchases or 'udgment creditor.
C. /estruction of the property su!'ect to the lien.
NOT! %n 6os. 1 and 3, there is no more tax lia!ility while
under nos. 5 and C, the taxpayer is still lia!le.
0A.-: 0%) ;. 6=)0, 61;. <@, 1@@C
A tax lien created in favor of the
government is superior to all other claims
and preferences, even to that of a private
litigant predicated on a court 'udgment. &he
tax lien attaches not only from the service of
the warrant of distraint of personal property
!ut from the time the tax !ecame due and
paya!le.
2 Co:)ro:ise
0%) may compromise !oth civil and
criminal lia!ility of the taxpayer.
)-JU%.%&-.:
1. &he taxpayer have a tax lia!ility
3. &here must !e an offer !y the taxpayer
of an amount to !e paid !y the taxpayer
5. &here must !e an acceptance !y the
0ommissioner or the taxpayer as the
case may !e of the offer in the
settlement of the original claim
Krounds for compromise
1. A reasona!le dou!t as to the validity of the
claim against the taxpayer exists or
3. &he financial position of the taxpayer
demonstrates a clear ina!ility to pay the
assessed tax
0ases that may !e compromised
1. /elin$uent accounts
3. 0ases under administrative protest
5. 0ases disputed !efore the courts
C. 0ases for collection already filed in courts
9. 0riminal violations except those already filed, and
those involving fraud.
0ases that cannot !e compromised
1. Iithholding tax cases
3. 0riminal tax fraud cases
5. 0riminal cases already filed in court
C. /elin$uent accounts with duly approved schedule of
installment payments
9. 0ases where reduction of payments had already !een
granted.
?. cases already decided and are final and executory
0ompromise of criminal violation
%n criminal violations, the compromise
must !e made prior to the filing of the information in
court.
All criminal violations may !e compromised except
1. those already filed in court and
3. those involved in fraud.
4i:i"a"ions,
1. Einimum compromise rate:
a. 10Q of the !asic tax assessed 2 in case of
financial incapacity.
!. =0Q of !asic tax assessed 2 other cases.
3. .u!'ect to approval of the -valuation Board
a. Ihen !asic tax involved exceeds
*1,<<<,<<<.<< or
!. Ihere settlement offered is less than the
prescri!ed minimum rates.
!e2e3a"ion of (o5er "o Co:)ro:ise
%enera2 R'2e, &he power to compromise or a!ate shall not
!e delegated !y the commissioner.
Ex+e)"ion, &he )egional -valuation Board may compromise
the assessment issued !y the regional offices involving !asic
taxes of * 9<<,<<<.<< or less.
Re:ed/ in +ase of fai2're "o +o:)2/,
&he 0%) may either:
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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a. -nforce the compromise, or
!. )egard it as rescinded and insists upon the original demand.
; !is"rain" and$or 4e./
= Ci.i2 A+"ion
? Cri:ina2 A+"ion
@ Forfei"'re
%mplies a divestiture of property without
compensation, in conse$uence of a default
or offense.
%t includes the idea of not only losing !ut
also having the property transferred to
another with out the consent of the owner
and wrongdoer.
Effe+", &ransfer the title to the specific thing from the
owner to the government.
1#en a.ai2a02e,
a. 6o !idder for the real property exposed for
sale.
!. %f highest !id is for an amount insufficient to
pay the taxes, penalties and costs.
Iith in two days thereafter, a return of the
proceeding is duly made.

&o5 enfor+ed,
a. %n case of personal property 2 !y sei7ure and
sale or destruction of the specific forfeited
property.
!. %n case of real property 2 !y a 'udgment of
condemnation and sale in a legal action or
proceeding, civil or criminal, as the case
may re$uire.
1#en forfei"ed )ro)er"/ "o 0e des"ro/ed or so2d,
a. &o !e destroyed 2 !y order of the 0%) when
the sale for consumption or use of the
following would !e in'urious to the pu!lic
health or pre'udicial to the enforcement of
the law: (at least 3< days after sei7ure+
1. distilled spirits
3. li$uors
5. cigars
C. cigarettes, and other manufactured
products of to!acco
9. playing cards
?. All apparatus used in or a!out the
illicit production of such articles.
!. &o !e sold or destroyed 2 depends upon the
discretion of 0%)
1. All other articles su!'ect to exercise
tax, (wine, automo!ile, mineral
products, manufactured oils,
miscellaneous products, non-
essential items a petroleum
products+ manufactured or removed
in violation of the &ax 0ode.
3. /ies for printing or ma4ing %)
stamps, la!els and tags, in imitation
of or purport to !e lawful stamps,
la!els or tags.
1#ere "o 0e so2d,
a. *u!lic sale: pro#ided, there is notice given
not less than 3< days.
!. *rivate sale: pro#ided, it is with the
approval of the .ecretary of ,inance.
Ri3#" of Rede:)"ion,
a. *ersonal entitled 2 taxpayer or anyone for
him
!. &ime to redeem 2 within one (1+ year from
forfeiture
c. Amount to !e paid 2 full amount of the taxes
and penalties, plus interest and cost of the
sale
d. &o whom paid 2 0ommissioner or the
)evenue 0ollection 1fficer
e. -ffect of failure to redeem 2 forfeiture shall
!ecome a!solute.
NOT!
&he )egister of /eeds is duty !ound to transfer the
title of property forfeited to the government with out
necessity of an order from a competent court.
A S's)ension of B'siness O)era"ions
8 Enfor+e:en" of Ad:inis"ra"i.e Fines
/. A!MINISTRATI8E REME!IES IN !ETAI4
(.-0.. 3<?-31>, 6%)0+
A !ISTRAINT - .ei7ure !y the government of personal
property, tangi!le or intangi!le, to enforce the payment of
faces, to !e followed !y its pu!lic sale, if the taxes are not
voluntarily paid.
V%6/.
a A+"'a2 2 &here is ta4ing of possession of personal property
out of the taxpayer into that of the government. %n case of
intangi!le property, taxpayer is also diverted of the power of
control over the property.
0 Cons"r'+"i.e 2 &he owner is merely prohi!ited from
disposing of his personal property.
!ifferen+e 0e"5een A+"'a2 and Cons"r'+"i.e !is"rain"
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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Actual 0onstructive
Eade on the property only of
a delin$uent taxpayer.
Eay !e made on the
property of any taxpayer
whether delin$uent or not
&here is actual ta4ing or
possession of the property.
&axpayer is merely
prohi!ited from disposing of
his property.
-ffected !y having a list of the
distraint property or !y service
or warrant of distraint or
garnishment.
-ffected !y re$uiring the
taxpayer to sign a receipt of
the property or !y leaving a
list of same
An immediate step for
collection of taxes where
amount due is definite.
.uch immediate step is not
necessary tax due may not
!e definite or it is !eing
$uestioned.
ReE'isi"es,
1. &axpayer is delin$uent in the payment of tax.
3. .u!se$uent demand for its payment.
5. &axpayer must fail to pay delin$uent tax at time
re$uired.
C. *eriod with in to assess or collect has not yet
prescri!ed.
1#en re:ed/ no" a.ai2a02e,
Ihere amount involved does not exceed *1<<.
%n 4eeping with the provision on the a!atement of the
collection of tax as the cost of same might even !e more than
*1<<.
(ro+ed're,
1. .ervice of warrant of distraint upon taxpayer or upon
person in possession of taxpayers personal property.
3. *osting of notice is not less than two places in the
municipality or city and notice to the taxpayer
specifying time and place of sale and the articles
distrained.
5. .ale at pu!lic auction to highest !idder
C. /isposition of proceeds of the sale.
Iho may effect distraint Amount %nvolved
1. 0ommissioner or his duly
authori7ed representative
3. )evenue /istrict 1fficer
()/1+
%n excess of
*1,<<<,<<<.<<
*1,<<<,<<<.<< or
less
&o5 A+"'a2 !is"rain" Effe+"ed
1. %n case of &angi!le *roperty:
a. 0opy of an account of the property
distrained, signed !y the officer, left either
with the owner or person from whom
property was ta4en, at the dwelling or place
of !usiness and with someone of suita!le
age and discretion
!. .tatement of the sum demanded.
c. &ime and place of sale.
3. %n case of intangi!le property:
a. .toc4s and other securities
.erving a copy of the warrant upon
taxpayer and upon president, manager,
treasurer or other responsi!le officer of the
issuing corporation, company or association.
!. /e!ts and credits
1. =eaving a copy of the warrant with the
person owing the de!ts or having in his
possession such credits or his agent.
3. Iarrant shall !e sufficient authority for
such person to pay 0%) his credits or
de!ts.
c. Ban4 Accounts 2 garnishment
1. .erve warrant upon taxpayer and
president, manager, treasurer or
responsi!le officer of the !an4.
3. Ban4 shall turn over to 0%) so much of
the !an4 accounts as may !e sufficient.
&o5 +ons"r'+"i.e !is"rain" Effe+"ed
1. )e$uire taxpayer or person in possession to:
- .ign a receipt covering property distrained
- 1!ligate him to preserve the same
properties.
- *rohi!it him from disposing the property
from disposing the property in any manner,
with out the authority of the 0%).
3. Ihere &axpayer or person in possession refuses to
sign:
- 1fficer shall prepare list of the property
distrained.
- %n the presence of two witnesses of
sufficient age and discretion, leave a copy in
the premises where property is located.
%ro'nds of Cons"r'+"i.e !is"rain"
1. &axpayer is retiring from any !usiness su!'ect to tax.
3. &axpayer is intending to leave the *hilippines or
5. &o remove his property there from.
C. &axpayer hides or conceals his property.
9. &axpayer acts tending to o!struct collection
proceedings.
NOT!
1. Ban4 accounts may !e distrained without violating
the confidential nature of !an4 accounts for no
in$uiry is made. B%) simply sei7es so much of the
deposit with out having to 4now how much the
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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REVIEW NOTES FOR TAXATION 2 5C
deposits are or where the money or any part of it
came from.
3. %f at any time prior to the consummation of the sale,
all proper charges are paid to the officer conducting
the same, the goods distrained shall !e restored to the
owner.
5. Ihen the amount of the !id for the property under
distraint is not e$ual to the amount of the tax or is
very much less than the actual mar4et value of
articles, the 0%) or his deputy may purchase the
distrained property on !ehalf of the national
government.
B 4E8< OF REA4 (RO(ERT< - an act of
sei7ure of real property in order to enforce the payment of
taxes. &he property may !e sold at pu!lic sale, if after sei7ure
the taxes are not voluntarily paid.
NOT! &he re$uisites are the same as that of distraint.
(ro+ed're,
1. %nternational )evenue officer shall prepare a duly
authenticated certificate showing
a. 6ame of taxpayer
!. Amount of tax and
c. *enalty due.
- enforcea!le throughout the *hilippines
3. 1fficer shall write upon the certificate a description
of the property upon which levy is made.
5. .ervice of written notice to:
a. &he taxpayer, and
!. )/ where property is located.
C. Advertisement of the time and place of sale.
9. .ale at pu!lic auction to the highest !idder.
?. /isposition of proceeds of sale.
NOT! &he excess shall !e turned over to owner.
Rede:)"ion of )ro)er"/ so2d or forfei"ed
a. (erson en"i"2ed, &axpayer or anyone for him
!. Ti:e "o redee:, one year from date of sale or
forfeiture
- Begins from registration of the deed of sale or
declaration of forfeiture.
- 0annot !e extended !y the courts.
c. (ossession )endin3 rede:)"ion, owner not
deprived of possession
d. (ri+e, Amount of taxes, penalties and interest
thereon from date of delin$uency to the date of sale
together with interest on said purchase price at 19:
per annum from date of purchase to date of
redemption.
!ifferen+e 0e"5een !is"rain" and 4e./
!is"rain" 4e./
personal property real property
forfeiture !y government, not
provided
forfeiture !y government
authori7ed where there is no
!idder or the highest !id is not
sufficient to pay the taxes,
penalties and costs.
&axpayer no given the right
of redemption
&axpayer can redeem
properties levied upon and
soldLforfeited to the
government.
1. Both are summary remedies for collection of taxes.
3. Both cannot !e availed of where amount involved is
not more than *1<<.
NOT!
1. %t is the duty of the )egister of /eeds concerned
upon registration of the declaration of forfeiture, to
transfer the title to the property with out of an order
from a competent court
3. &he remedy of distraint or levy may !e repeated if
necessary until the full amount, including all
expenses, is collected.
C %ARNIS&MENT
Ban4 Accounts 2 garnishment
1. .erve warrant upon taxpayer and president, manager,
treasurer or responsi!le officer of the !an4.
3. Ban4 shall turn over to 0%) so much of the !an4 accounts
as may !e sufficient.
E F7!ICIA4 REME!IES IN !ETAI4 6SEC 220C NIRC-
1. *eriod within which the action may !e filed
Ci.i2 and Cri:ina2 A+"ions,
1. Brought in the name of the Kovernment of
the *hilippines.
3. 0onducted !y =egal 1fficer of B%)
5. Eust !e with the approval of the 0%), in
case of action, for recovery of taxes, or
enforcement of a fine, penalty or forfeiture.
A. 0%;%= 0A.-. (.-0. 3<5,333,6%)0+
&hree (5+years from the following,
whichever comes later:
5. &he last day prescri!ed !y law for filing
the return
C. &he day when the return was actually
filed
&en (1<+ years after the discovery of the
falsity, fraud or omission in case of:
5. ,alse or fraudulent return with intent to
evade tax, or
C. ,ailure to file a return
Iithin the period agreed upon, when !oth
the &* and the 0ommissioner have agreed in
writing, !efore the expiration of the period
in .ec. 3<5 for the assessment of the tax.
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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REVIEW NOTES FOR TAXATION 2 59
1#ere "o Fi2e
1+ 0ourt of &ax Appeals- where the principal amount of taxes
and fees exclusive of charges and penalties claimed is one
million pesos and a!ove
3+ )&0, Eun. &0, Eetro &0- where the principal amount of
taxes and fees, exclusive of charges and penalties claimed is
less than*1,<<<,<<<.<< (.ec >WcX, )A @383+
&he approval of the 0%) is essential in civil
cases (.ec. 33<+. Dowever under .ec. > of
6%)0, the 0ommissioner may delegate
suchpower to a )egional /irector.
Actions instituted !y the government to collect
internal revenue taxes in regular courts ()&0 or
E&0s, depending on the amount involved+. %t
includes filing !y the government with the pro!ate
court claims against the deceased taxpayer.
)esorted to when the tax lia!ility !ecomes final and
unappeala!le, or when the decision of the
0ommissioner !ecomes final or executory. Ihen:
A tax is assessed and the assessment !ecomes final
and unappeala!le !ecause the taxpayer
fails to file an administrative protest with the B%)
within 5< days from the receipt of the assessment.
Ihen an administrative protest filed !y the taxpayer
against the assessment is denied, in whole and in part
or %s not acted upon within 18< days from su!mission
of the documents, and
&he taxpayer adversely affected !y the decision or
inaction fails to file an appeal with the 0&A within
5< days from receipt of said decision or from the
lapse of the18< day period.
B. 0)%E%6A= 0A.-. ( &%&=- A, 6%)0 .-0. 381,
6%)0+
All violations of any provision of the tax code shall
prescri!e after five (9+ years.
NOTE,
1#en s#o'2d i" +o::en+e: &he five (9+ year
prescriptive period shall !egin to run from the
a. If Ano+n, day of the commission of the violation.
!. If not Ano+n, from the time of discovery and the
institution of 'udicial proceeding for its
investigation and punishment.
1#en is i" in"err')"ed:
a. Ihen a proceeding is instituted against the
guilty person
!. Ihen the offender is a!sent from the
*hilippines.
1#en s#o'2d i" r'n a3ain: Ihen the proceeding is
dismissed for reason not constituting 'eopardy.
1#ere "o fi2e
1+ 0ourt of &ax Appeals- on criminal offenses arising from
violations of the 6%)0 or &00 and other laws administered !y
the B%) and the B10, where the principal amount of taxes and
fees, exclusive of charges and penalties claimed is
*1,<<<,<<<.<< and a!ove.
3+ )&0, Eun. &0, Eetro &0- on criminal offenses arising
from violations of the 6%)0 or &00 and
other laws administered !y the B%) and the B10, where the
principal amount of taxes and fess
exclusive of charges and penalties claimed is less than
*1,<<<,<<<.<< or where there is no specified amount claimed
(.ec >W!X, )A @383+
0A.-.:
)-*UB=%0 ;. D%H16, /-0. 15, 1@@@ (re: approval of filing
of civil and criminal actions+
)evenue Adm. 1rder 6o. 1<-@9 specifically
authori7es the =itigation and *rosecution section of
the =egal /ivision of regional district offices to
institute the necessary civil and criminal actions for
tax collection. As the complaint filed in this case was
signed !y the B%)s 0hief of =egal /ivision for
)egion C and verified !y the )egional /irector, there
was, therefore, compliance with the law.
.ec. > of 6%)0, authori7es the B%) 0ommissioner to
delegate the powers vested in him under the pertinent
provision of the 0ode to any su!ordinate official with
the ran4 e$uivalent to a division chief or higher.

0%) ;. =A .U-)&- 0%KA), NU=B <C, 1@@3 (re:


participation of the 1ffice of the .olicitor Keneral+
&he institution or commencement !efore a proper
court of civil and criminal actions and proceedings
arising under the &ax )eform Act which Ushall !e
conducted !y legal officers of the Bureau of %nternal
)evenueU is not in dispute. An appeal from such
court, however, is not a matter of right. .ection 33<
of the &ax )eform Act must not !e understood as
overturning the long esta!lished procedure !efore
this 0ourt in re$uiring the .olicitor Keneral to
represent the interest of the )epu!lic. &his 0ourt
continues to maintain that it is the .olicitor Keneral
who has the primary responsi!ility to appear for the
government in appellate proceedings.
*610 ;. 0A, A*)%= 3?, 3<<9
=%E ;. 0A, 10&. 18, 1@@< ( re: prescription of
criminal actions, .ec, 381, 6%)0+
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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REVIEW NOTES FOR TAXATION 2 5?
should !e filed 9 years from the (1+ day of the
commission of the violation of the law, and if the
same shall !e not 4nown, from the (3+ discovery
thereof and the institution of the 'udicial proceedings
for its investigation and punishment.
EA)01. %% ;. 0A, NU6- 9, 1@@> (re: enforcement of tax
lia!ility during pendency of pro!ate proceedings+
&he B%) is authori7ed to collect estate tax deficiency
through the summary remedy of the levying upon and
sale of properties of a decedent, without the cognition
and authority of the court sitting in pro!ate over the
supposed will of the deceased, !ecause the collection
of estate tax is executive in character. As such the
estate tax is exempted from the application of the
statute of the non 2 claims, and this is 'ustified !y the
necessity of the government finding, immortali7ed in
the maxim that taxes are the life!lood of the
government
E EFFECTS OF FAI47RE TO (A< T&E TAX ON
TIME, A!!ITIONS TO T&E TAX 6C&A(TER IC TIT4E
XC NIRC-
1. .U)0DA)K-.- a civil penalty imposed !y law as
an addition to the main tax re$uired to !e paid. %t is not a
criminal penalty !ut a civil administrative sanction provided
primarily as safeguard for the protection of the .tate
revenue and to reim!urse the government for the
expenses of investigation and the loss resulting from
the taxpayers fraud. A surcharge added to the main tax
is su!'ect to interest.
a. 1)/%6A)B (.-0. 3C8A, 6%)0+
*enalty: 39: of the amount due, in addition to the tax
re$uired to !e paid
a. ,ailure to file any return and to pay the tax
due thereon as re$uired !y the 6%)0 or
rules.
!. ,iling a return with an internal revenue
officer other than those with whom the
return is re$uired to !e fired. 6ot authori7ed
officer.
c. ,ailure to pay the deficiency tax within the
time prescri!ed for its payment in the notice
of assessment.
d. ,ailure to pay the full or part of the amount
of tax shown on any return, or the full
amount of tax due for which no return is
re$uired to !e filed, on or !efore the date
prescri!ed for its payment.
!. ,)AU/ *-6A=&B (.-0. 3C8B, 6%)0+
*enalty: 9<: of the amount due, in addition to the tax
re$uired to !e paid
a. %n case of willful neglect to file the return
within the period prescri!ed !y the 6%)0 or
rule.
!. %n case a false or fraudulent return is
willfully made.
0A.-: 0%) ;. NA;%-), NU=B 51, 1@@1
&here was no actual intentional fraud in
filing the return. *rivate respondents
notation on the tax return was at most an
error or mista4e of fact or law not
constituting fraud, an invitation for
investigation and private respondent had
literally# laid his cards on the ta!le.
3. %6&-)-.&- &his is an increment on any unpaid
amount of tax assessed at the rate of 3<: per annum
or such higher rate as may !e prescri!ed !y the regulations
from the date prescri!ed for payment until the amount
is fully paid.
Classes of interest
1. /eficiency interest
3. /elin$uency interest
5. %nterest on extended payment
"eficiency interest
Any deficiency in the tax due shall !e su!'ect to the
interest of 3<: per annum which shall !e assessed
and collected from the date prescri!ed for its
payment until the full payment thereof.
#hen delin$uency interest imposed%
/elin$uency interest is imposed in case of failure to
pay:
1. &he amount of the tax due on any return re$uired
to !e filed or
3. &he amount of tax due for which no return is
re$uired or
5. A deficiency tax or any surcharge or interest
thereon on the issue date appearing in the notice
and demand of the 0ommissioner.
)ate is 3<: per annum until the amount is fully paid
which interest shall form part of the tax.
In"eres" on Ex"ended (a/:en".
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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1+ any person who is $ualified and elects to pay the tax on
installment !ut fails to pay the tax, or any installment, or any
part on or !efore the date prescri!ed or
3+ where the 0ommissioner has authori7ed an extension of
time within which to pay a tax or a deficiency tax or any part
thereof,
5+ from the date of notice and demand until it is paid.
Co:)ro:ise (ena2"/
1. %t is a certain amount of money which the taxpayer
pays to compromise a tax violation.
3. %t is pain in lieu of a criminal prosecution.
5. .ince it is voluntary in character, the same may !e
collected only if the taxpayer is willing to pay them.
Fai2're "o Fi2e Cer"ain Infor:a"ion Re"'rns 6Se+ 2?0C
NIRC-
A+ *enalty: ( 1C000 for ea+# fai2're
B+ &he aggregate amount for all such failure shall no" ex+eed
( 2?C000 during a calendar year
0+ Upon notice and demand !y the 0ommissioner
/+ Unless it is shown that such failure is due to reasona!le
cause and not to willful neglect.
%n the case of each failure to file:
1+ information return
3+ statement or list
5+ 4eep any record
C+ supply any information
-+ re$uired !y this 0ode or !y the 0ommissioner on the date
prescri!ed thereof.
4OCA4 TAXATION
A 4o+a2 Taxa"ion, %enera2 Con+e)"s
1. 6ature of =ocal &axing *ower
a. 0onstitutional *rovision (.ection 9, Article A+
"-ach local government unit shall have the power
to create its own sources of revenues and to levy
taxes, fees and charges su!'ect to such guidelines
and limitations as the 0ongress may provide,
consistent with the !asic policy of local
autonomy. .uch taxes, fees, and charges shall
accrue exclusively to the local governments.#
!. /elegated *ower
i. 0ity of .an *a!lo =aguna vs. )eyes, Earch
39, 1@@@
"&he power to tax is primarily vested in
0ongress. Dowever, in our 'urisdiction, it
may !e exercised !y local legislative !odies,
no longer merely !y virtue of a valid
delegation as !efore, !ut pursuant to direct
authority conferred !y .ection 9, Article A
of the 0onstitution. &he important legal
effect of .ection 9 is that henceforth, in
interpreting statutory provisions on
municipal fiscal powers, dou!ts will have to
resolved in favor of municipal
corporations.#
ii. Eeralco vs. *rovince of =aguna, Eay 9,
1@@@
"*refatorily, it might !e well to recall that
local governments do not have the inherent
power to tax except to the extent that such
power might !e delegated to them either !y
the !asic law or !y statute. *resently, under
Article A of the 1@8> 0onstitution, a general
delegation of that power has !een given in
favor of local government units. &he 1@8>
0onstitution has a counterpart provision in
the 1@>5 0onstitution, which did come out
with a similar delegation of revenue ma4ing
powers to local governments. Under the
regime of the 1@59 0onstitution no similar
delegation of tax powers was provided, and
local government units instead derived their
tax powers under a limited statutory
authority. Ihereas, then, the delegation of
tax powers granted at that time !y statute to
local governments was confined and defined
(outside of which the power was deemed
withheld+, the present constitutional rule
(starting with the 1@>5 0onstitution+,
however, would !roadly confer such tax
powers su!'ect only to specific exceptions
that the law might prescri!e. Under the now
prevailing 0onstitution, where there is
neither a grant nor a prohi!ition !y statute,
the tax power must !e deemed to exist
although 0ongress may provide statutory
limitations and guidelines. &he !asic
rationale for the current rule is to safeguard
the via!ility and self-sufficiency of local
government units !y directly granting them
general and !road tax powers. 6evertheless,
the fundamental law did not intend the
delegation to !e a!solute and unconditional
the constitutional o!'ective o!viously is to
ensure that, while the local government units
are !eing strengthened and made more
autonomous, the legislature must still see to
it that (a+ the taxpayer will not !e over-
!urdened or saddled with multiple and
unreasona!le impositions (!+ each local
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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government unit will have its fair share of
availa!le resources, (c+ the resources of the
national government will not !e unduly
distur!ed and (d+ local taxation will !e fair,
uniform, and 'ust.#
iii. Eactan 0e!u %nternational Airport
Authority vs. Earcos, .eptem!er 11, 1@@?
"&he taxing powers of local government
units cannot extend to the levy of, inter alia,
"taxes, fees and charges of any 4ind on the
6ational Kovernment, its agencies and
instrumentalities, and local government
units# however, pursuant to .ection 353,
provinces, cities, and municipalities in the
Eetropolitan Eanila Area may impose the
real property tax except on, inter alia, "real
property owned !y the )epu!lic of the
*hilippines or any of its political
su!divisions except when the !eneficial use
thereof has !een granted, for consideration
or otherwise, to a taxa!le person,# as
provided in item (a+ of the first paragraph of
.ection 35C.#
iv. 6A*101) vs. 0ity of 0a!anatuan, April @,
3<<5
"%n recent years, the increasing social
challenges of the times expanded the scope
of state activity, and taxation has !ecome a
tool to reali7e social 'ustice and the
e$uita!le distri!ution of wealth, economic
progress and the protection of local
industries as well as pu!lic welfare and
similar o!'ectives. &axation assumes even
greater significance with the ratification of
the 1@8> 0onstitution. &henceforth, the
power to tax is no longer vested exclusively
on 0ongress local legislative !odies are
now given direct authority to levy taxes, fees
and other charges pursuant to Article A,
section 9 of the 1@8> 0onstitution.
&his paradigm shift results from the
reali7ation that genuine development can !e
achieved only !y strengthening local
autonomy and promoting decentrali7ation of
governance. ,or a long time, the countrys
highly centrali7ed government structure has
!red a culture of dependence among local
government leaders upon the national
leadership. %t has also "dampened the spirit
of initiative, innovation and imaginative
resilience in matters of local development on
the part of local government leaders.# &he
only way to shatter this culture of
dependence is to give the =KUs a wider role
in the delivery of !asic services, and confer
them sufficient powers to generate their own
sources for the purpose. &o achieve this
goal, section 5 of Article A of the 1@8>
0onstitution mandates 0ongress to enact a
local government code that will, consistent
with the !asic policy of local autonomy, set
the guidelines and limitations to this grant of
taxing powers.#
- -xtent of the *ower of 0ongress in =ocal
&axation
- 0ity Kovt. of Jue7on 0ity vs. Bayantel, Earch
?, 3<<?
"&he power to tax is primarily vested in the
0ongress however, in our 'urisdiction, it may !e
exercised !y local legislative !odies, no longer
merely !e virtue of a valid delegation as !efore,
!ut pursuant to direct authority conferred !y
.ection 9, Article A of the 0onstitution. Under
the latter, the exercise of the power may !e
su!'ect to such guidelines and limitations as the
0ongress may provide which, however, must !e
consistent with the !asic policy of local
autonomy.
0learly then, while a new slant on the su!'ect of
local taxation now prevails in the sense that the
former doctrine of local government units
delegated power to tax had !een effectively
modified with Article A, .ection 9 of the 1@8>
0onstitution now in place, .the !asic doctrine on
local taxation remains essentially the same. ,or
as the 0ourt stressed in Eactan, Uthe power to
tax is WstillX primarily vested in the 0ongress.U
%n net effect, the controversy presently !efore the
0ourt involves, at !ottom, a clash !etween the
inherent taxing power of the legislature, which
necessarily includes the power to exempt, and
the local governments delegated power to tax
under the aegis of the 1@8> 0onstitution.#
3. ,undamental *rinciples in the exercise of =ocal
&axing *ower (.ec. 15<, =K0+
5. -xercise of =ocal &axing *ower
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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B. Co::on 4i:i"a"ions on "#e Exer+ise of 4o+a2 Taxin3
(o5er
1. &he *rinciple of *reemption L -xclusionary )ule
(.ec. 155, =K0+
- %f the national government elects to tax a
particular su!'ect within a =ocal Kovernment
Unit, it is impliedly withholding the power of
=KU to tax the same.
- Adopted in the *hilippines despite non-
prohi!ition of dou!le taxation unless expressly
allowed !y 0ongress.
3. 0ases:
a. *rovince of Bulacan vs. 0A, 6ovem!er 3>, 1@@8
A province may not levy excise taxes on articles
already taxed !y the 6ational %nternal )evenue
0ode. %t is clearly apparent from .ection 191 of
the 6ational %nternal )evenue 0ode levies a tax
on all $uarry resources, regardless of origin,
whether extracted from pu!lic or private land.
&hus, a province may not ordinarily impose
taxes on stones, sand, gravel, earth and other
$uarry resources, as the same are already taxed
under the 6ational %nternal )evenue 0ode. &he
province can, however, impose a tax on stones,
sand, gravel, earth and other $uarry resources
extracted from pu!lic land !ecause it is expressly
empowered to do so under the =ocal
Kovernment 0ode. As to stones, sand, gravel,
earth and other $uarry resources extracted from
private land, however, it may not do so, !ecause
of the limitation provided !y .ection 155 of the
0ode in relation to .ection 191 of the 6ational
%nternal )evenue 0ode.
!. ,irst *hilippine %ndustrial 0orp. vs. 0A,
/ecem!er @, 1@@8 (.ection 155' =ocal &ax on
0ommon 0arriers+
&here is no dou!t that petitioner is a Ucommon
carrierU and, therefore, exempt from the !usiness
tax as provided for in .ection 155 ('+, of the
=ocal Kovernment 0ode, to wit:
U.ection 155. 0ommon =imitations on the
&axing *owers of =ocal Kovernment Units. 2
Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities,
municipalities, and !arangays shall not extend to
the levy of the following :
x x x x x x x x x
('+ &axes on the gross receipts of transportation
contractors and persons engaged in the
transportation of passengers or freight !y hire
and common carriers !y air, land or water,
except as provided in this 0ode.U
%t is clear that the legislative intent in excluding
from the taxing power of the local government
unit the imposition of !usiness tax against
common carriers is to prevent a duplication of
the so-called Ucommon carrierTs tax.U
*etitioner is already paying three (5:+ percent
common carrierTs tax on its gross salesLearnings
under the 6ational %nternal )evenue 0ode.W1@X
&o tax petitioner again on its gross receipts in its
transportation of petroleum !usiness would
defeat the purpose of the =ocal Kovernment
0ode.
c. *alma /evelopment 0orp. vs. Eunicipality of
Ealangas, 1cto!er 1?, 3<<5 (.ec. 155e+
By express language of .ections 195 and 199 of
)A 6o. >1?<, local government units, through
their .anggunian, may prescri!e the terms and
conditions for the imposition of toll fees or
charges for the use of any pu!lic road, pier or
wharf funded and constructed !y them. A
service fee imposed on vehicles using municipal
roads leading to the wharf is thus valid.
Dowever, .ection 155(e+ of )A 6o. >1?<
prohi!its the imposition, in the guise of
wharfage, of fees -- as well as all other taxes or
charges in any form whatsoever -- on goods or
merchandise. %t is therefore irrelevant if the fees
imposed are actually for police surveillance on
the goods, !ecause any other form of imposition
on goods passing through the territorial
'urisdiction of the municipality is clearly
prohi!ited !y .ection 155(e+.
d. Batangas *ower 0orp. vs. Batangas 0ity, April
38, 3<<C (.ection 155g+
.ec. 155 (g+ of the =K0, which proscri!es local
government units (=KUs+ from levying taxes on
B1%-certified pioneer enterprises for a period of
six years from the date of registration, applies
specifically to taxes imposed !y the local
government, li4e the !usiness tax imposed !y
Batangas 0ity on B*0 in the case at !ar.
)eliance of B*0 on the provision of -xecutive
1rder 6o. 33?,W18X specifically .ection 1,
Article 5@, &itle %%%, is clearly misplaced as the
six-year tax holiday provided therein which
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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commences from the date of commercial
operation refers to income taxes imposed !y the
national government on B1%-registered pioneer
firms. 0learly, it is the provision of the =ocal
Kovernment 0ode that should apply to the tax
claim of Batangas 0ity against the B*0. &he ?-
year tax exemption of B*0 should thus
commence from the date of B*0s registration
with the B1% on Nuly 1?, 1@@5 and end on Nuly
19, 1@@@.
5. =ocal &axing *ower cannot extend to:
- &hose already covered !y the 6ational
%nternal )evenue 0ode, i.e. %ncome tax,
&ransfer tax, ;A&, percentage tax, -xcise
&ax, /ocumentary .tamp &ax
- &hose already covered !y the &ariff and
0ustoms 0ode
- /uties upon products a!out to !e
exported and goods passing
through territorial 'urisdiction
cannot !e taxed !y =KUs.
- &axation of the 6ational Kovernment,
including its agencies and instrumentalities
as we as local government units
- &hose su!'ects not within the am!it of real
taxation !y reason of pu!lic policy, i.e.
0ooperatives registered under )A ?@58
(0/A+
- &hose en'oying privileges as granted !y the
Board of %nvestments (%nvestments *riorities
*lan+
- Both pioneer and non-pioneer
enterprises en'oy such 4ind of
privileges under the 1mni!us
%nvestments 0ode.
- &axes on agricultural or a$uatic products
sold !y marginal enterprises
- &axes, fees, or charges for the registration of
motor vehicles and for the issuance of all
4inds of licenses or permits for the driving
thereof, except tricycles.
- =&1 vs. Butuan 2 0ongress has no intention
to delegate issuance of permits to =KUs.
&he intention of the law is to centrali7e
issuance of permits to drive motor vehicles
including tricycles is to monitor the
operation of the same. .ection 155(l+ is
only for franchise where to grant the same is
within the discretion of =KUs. &he permit to
drive is issued !y =&1.
C. &ime of *ayment (.ection 1?>, =K0+
Unless otherwise provided in =K0, all local taxes,
fees, and charges shall !e paid within the first twenty
(3<+ days of Nanuary or of each su!se$uent $uarter, as
the case may !e. &he .anggunian concerned may, for
a 'ustifia!le reason or cause, extend the time for
payment of such taxes, fees, or charges without
surcharges or penalties, !ut only for a period not
exceeding six (?+ months.
9. .urcharges, %nterests and *enalties
0. )esidual *ower to &ax (.ec. 18?+
- &he power of =KU to tax even of not expressly
granted !y the =K0 provided that there is no
express prohi!ition.
/. .pecific &axing Units
1. *rovinces may tax:
i. &ransfer of )eal *roperty ownership
- 1nerous or gratuitous
- *reemption rule is not applica!le
- P of 1:
ii. *rinting and *u!lication
iii. ,ranchise &ax
- Kovernment franchise, whether primary or
secondary, i.e. pu!lic utility companies
- %f the franchise grants tax exemption and the
same was executed prior to 1@@1 =K0, it is
deemed revo4ed !y reason of the laws !lan4et
revocation.
- At a rate not exceeding P of 1: of the Kross
Amount receipt of the preceding calendar year
iv. *rofessional &ax
- &hose who have passed government licensure
examinations are the ones lia!le
- Amount 2 not exceeding *hp 5<<.<<
- %mposed !y the city or province where the
taxpayers principal office is located
- Iith employer-employee relationship 2
lia!ility to *&) depends on the extent of
services provided. %f services provided is
exclusive to the employer, *&) is not
necessary, otherwise, the employee is lia!le.
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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v. .and and Kravel &ax
- %mposed on extraction of sand, gravel and
other $uarry resources
- 6ot more than 1<: of the ,E; of what was
extracted
- 0ase: *rovince of Bulacan vs. 0A
vi. Amusement &ax
- As high as 5<:
- Applies to theaters, cinemas, concert halls,
!oxing stadiums, circuses and other places of
amusements.
vii. &axes on /elivery truc4s
3. 0ities may tax those that may !e taxed !y a province
and a municipality. &hey may impose a tax rate
which is 9<: higher than the rates !eing imposed !y
provinces and municipalities.
5. Eunicipalities
i. Business permit
ii. 0ommunity &axes
iii. Eay levy taxes, fees, and charges not otherwise
levied !y provinces (.ec. 1C3+
REME!IES IN 4OCA4 TAXATION
A REME!IES OF T&E %O8ERNMENT
a A!MINISTRATI8E
1+ =ocal Kovernments =ien (.ec 1>5, =K0+
3+ Assessment !y the =ocal &reasurer
5+ /istraint of goods, chattels or effect and
other personal properties of whatever
character (.ec. 1>C and 1>9, =K0+
a. .ei7ure
!. Accounting of distrained goods
c. *u!lication
d. )elease of distrained property upon
payment prior to sale
e. *rocedure of sale
f. /isposition of proceeds
C+ =evy (.ec. 1>C and 1>?,. =K0+

Con"en"s of assess:en",
1. Mera2+o .s Bar2is (,e!. 1, 3<<3+ - A notice of
assessment as provided for in the )eal *roperty
&ax 0ode should effectively inform the taxpayer
of the value of a specific property, or proportion
thereof su!'ect to tax, including the discovery,
listing, classification, and appraisal of properties.
&he petitioner is also correct in pointing out that
the last paragraph of the said notices that inform
the taxpayer that in case payment has already
!een made, the notices may !e disregarded is an
indication that it is in fact a notice of collection.
%t could only $ualify as a notice of collection if
there is an unmista4a!le demand for payment of
!ac4 taxes.
1#o is en"i"2ed "o "#e no"i+e of assess:en"
1. Ta2'san .s Ta/a3C (April <C, 3<<1+ - 0ases
involving an auction sale of land for the collection
of delin$uent taxes are in personam. &hus, notice
!y pu!lication, though sufficient in proceedings in
rem, does not as a rule satisfy the re$uirement of
proceedings in personam. As such, mere
pu!lication of the notice of delin$uency would not
suffice, considering that the procedure in tax sales
is in personam. %t was, therefore, still incum!ent
upon the city treasurer to send the notice of tax
delin$uency directly to the taxpayer in order to
protect the interests of the latter.
%n the present case, the notice of
delin$uency was sent !y registered mail to the
permanent address of the registered owner in
Eanila. %n that notice, the city treasurer of Baguio
0ity directed him to settle the charges
immediately and to protect his interest in the
property. Under the circumstances, we hold that
the notice sent !y registered mail ade$uately
protected the rights of the taxpayer, who was the
registered owner of the condominium unit.
,or purposes of the real property tax, the
registered owner of the property is deemed the
taxpayer. Dence, only the registered owner is
entitled to a notice of tax delin$uency and other
proceedings relative to the tax sale. 6ot !eing
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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registered owners of the property, petitioners
cannot claim to have !een deprived of such
notice. %n fact, they were not entitled to it.
!. F7!ICIA4 (.ec. 1>C, =K0+
1+ 0ivil Action in the court
3+ ,iled !y =ocal &reasurer
5+ Iithin 9 years from the date the
taxes, fees or charges !ecame due
(eriod 5i"#in 5#i+# "o +o22e+" H
within 9 years from the date of
assessment !y administrative or
'udicial action
+ OT&ER (RO8ISIONS
A++r'a2 of "#e "ax H (.ec. 1??, =K0+
- %enera2 r'2e, All local taxes, fees, and charges
shall accrue on the 1
st
day of Nanuary of each year.
- Ex+e)",
i. Unless otherwise provided in the =K0,
ii. 6ew taxes, fees or charges, or changes in the rates
thereof, shall accrue on the 1
st
day of the $uarter
next following the effectivity of the ordinance
imposing such new levies or rates
Ti:e of )a/:en" H (.ec. 1?>, =K0+
- %enera2 R'2e, All local taxes, fees and charges
shall !e paid within the first 3< days of Nanuary or
of each su!se$uent $uarter, as the case may !e.
- Ex+e)",
i. Unless otherwise provided !y the =K0
ii. &he .anggunian concerned may, for a 'ustifia!le
reason or cause, extend the time for payment of
such taxes, fees, or charges or penalties, !ut only
for a period not exceeding ? months.
S'r+#ar3esC In"eres"s and (ena2"ies H (.ec. 1?8,
=K0+
- .anggunian may impose:
i. .urcharge 2 not exceeding 39: of the amount of
taxes, fees or charges not paid on time and
ii. %nterest 2 not exceeding 3: per month of the
unpaid taxes, fees or charges, including
surcharges, until such amount is fully paid, BU&
in no case shall the total interest on the unpaid
amount or portion thereof exceed 5? months.
B REME!IES OF T&E TAX(A<ER
a A!MINISTRATI8E
A))ea2 "o "#e Se+re"ar/ of F's"i+eI Re,
ne52/ ena+"ed "ax ordinan+e 6Se+ 18AC
4%C- H Any $uestion on the
constitutionality or legality of tax
ordinances or revenue measures Iithin 5<
days from its effectivity.
1. !ri2on .s 4i:C (August C, 1@@C+ -
.ection 18> authori7es the .ecretary of
Nustice to review only the constitutionality
or legality of the tax ordinance and, if
warranted, to revo4e it on either or !oth of
these grounds. Ihen he alters or modifies
or sets aside a tax ordinance, he is not also
permitted to su!stitute his own 'udgment
for the 'udgment of the local government
that enacted the measure. .ecretary /rilon
did set aside the Eanila )evenue 0ode, !ut
he did not replace it with his own version
of what the 0ode should !e. De did not
pronounce the ordinance unwise or
unreasona!le as a !asis for its annulment.
De did not say that in his 'udgment it was a
!ad law. Ihat he found only was that it
was illegal. All he did in reviewing the said
measure was determine if the petitioners
were performing their functions is
accordance with law, that is, with the
prescri!ed procedure for the enactment of
tax ordinances and the grant of powers to
the city government under the =ocal
Kovernment 0ode. As we see it, that was
an act not of control !ut of mere
supervision.
3. &a3ono/ MarBe" 8ednors Assn .s
M'ni+i)a2i"/ of &a3ono/ B'2a+anC
(,e!ruary ?, 3<<3+ - .ec. 18>, =K0
re$uires that an appeal of a tax ordinance
or revenue measure should !e made to the
.ecretary of Nustice within 5< days from
effectivity of the ordinance and even
during its pendency, the effectivity of the
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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assailed ordinance shall not !e suspended.
%n the case at !ar, Eunicipal 1rdinance 6o.
38 too4 effect in 1cto!er 1@@?. *etitioner
filed its appeal only in /ecem!er 1@@>,
more than a year after the effectivity of the
ordinance in 1@@?. 0learly, the .ecretary of
Nustice correctly dismissed it for !eing
time-!arred. At this point, it is apropos to
state that the timeframe fixed !y law for
parties to avail of their legal remedies
!efore competent court is not a Umere
technicalityU that can !e easily !rushed
aside. &he periods stated in the section are
mandatory. 1rdinance 6o. 38 is a revenue
measure adopted !y the municipality of
Dagonoy to fix and collect pu!lic mar4et
stall rentals. Being its life!lood, collection
of revenues !y the government is of
paramount importance. &he funds for the
operation of its agencies and provision of
!asic services to its inha!itants are largely
derived from its revenues and collections.
&hus, it is essential that the validity of
revenue measures is not left uncertain for a
considera!le length of time. Dence, the
law provided a time limit for an aggrieved
party to assail the legality of revenue
measures and tax ordinances.
5. T/ .s Tra:)eC (/ecem!er 1, 1@@9+ 2
*etitioners failed to appeal the assessment
of their properties to the Board of
Assessment Appeal within sixty (?<+ days
from the date of receipt of the written
6otice of Assessment, and if it is true that
petitioner, as alleged in their pleadings,
was not afforded the opportunity to appeal
to the !oard of assessment appeal, then
they could have availed of the provisions of
.ection 393, of the same ).A. >1?< !y
paying the real estate tax under protest.
Because of petitioners failure to avail of
either .ections 33? or 393 of ).A. >1?<,
they failed to exhaust administrative
remedies provided for !y law !efore
!ringing the case to 0ourt. &herefore the
filing of this case !efore this 0ourt is
premature, the same not falling under the
exception !ecause the issue involved is not
a $uestion of law !ut of fact.
A))ea2 "o "#e Board of Assess:en"
A))ea2s 6Se+s 22@ and 2?2C 4%C- H
- .ec. 33?, =K0 2 Any owner or person who
is not satisfied with the action of the
provincial, city or municipal assessor in the
assessment of his property Iithin ?< days
from receipt of the written notice of
assessment Appeal to the BAA of the
province or city !y filing a petition under
oath and copies of the tax declarations and
affidavits or documents in support of
appeal.
- .ec. 393 (d+, =K0 2 %n the event that the
protest is denied or upon the lapse of the
?<-day period to decide, the taxpayer may
appeal to the BAA.
(ro"es" of "#e assess:en" 6Se+ 22@ and
2?2C 4%C-
- *ay under protest and such shall !e
annotated in the tax receipt
- *rotest in writing must !e filed within 5<
days from payment of the tax to the
provincial, city or municipal treasurer, who
shall decide the protest within ?< days from
receipt.
- &he tax or a portion thereof paid under
protest shall !e held in trust !y the
treasurer concerned.
- *rotest decided in favor of taxpayer 2 the
amount or portion of the tax protested shall
!e refunded to the protestant or applied as
tax credit against his existing or future tax
lia!ility.
- *rotest denied or upon lapse of the period
to decide - appeal to the BAA.
C2ai: for ref'nd 6Se+ 2?;C 4%C-
- Ihen an assessment of !asic real property
tax, or any other tax levied is found to !e
illegal or erroneous and the tax is
accordingly reduced or ad'usted,
- &he taxpayer may file a written claim for
refund or credit of taxes and interests
- Iith the provincial or city treasurer
- Iithin 3 years from the date the taxpayer
is entitled to such reduction or ad'ustment.
- &he provincial or city treasurer shall decide
the claim for refund or credit within ?<
days from receipt
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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- %n case the claim is denied, the taxpayer
may appeal to the BAA.
Re:edies fro: a denia2 of "#e )ro"es"
and ref'nd
- %t should not only !e the written claim
!efore the treasurer that must !e filed in 3
years !ut the taxpayer must also !e a!le to
file a case in court !efore the expiration of
the 3 year period.
- &here is no appellate remedy from the
denial of the treasurer !efore the regular
court !ut an independent and original
action for refund.
0 F7!ICIA4
G'es"ionin3 Tax Sa2e
REA4 (RO(ERT< TAXATION
Rea2 (ro)er"/ TaxC defined
A direct tax on ownership of lands and !uildings or
other improvements thereon
*aya!le regardless of whether the property
is used or not,
although the value may vary in
accordance with such factor.
A %o.ernin3 4a5
Distorical Bac4ground:
1. 0ommonwealth Act 6o. C>< 2 1ld
Assessment =aw
- since 1@3<
3. )eal *roperty &ax 0ode (*residential /ecree
6o. C?C, as amended+
- Nune 1, 1@>C
5. =ocal Kovernment 0ode ()epu!lic Act 6o.
>1?<+
- Nanuary 1, 1@@3
- &he changes however were only on the tax
rate ceilings and assessment levels.
&he =ocal Kovernment 0ode covers the
administration, appraisal, assessment, levy and
collection of )eal *roperty &ax, i.e. tax on land and !uilding
and other structures and improvements on it, including
machineries. (.u!'ect to the definition given !y Art. C19
of the 6ew 0ivil 0ode+
B Na"'re of Rea2 (ro)er"/ Tax H Na"iona2 or 4o+a2D
Dy!rid of national and local tax
*rovisions of =K0 are applied nationwide
!ut rates imposed are different per =KU
ordinance
&he real property tax has !een considered and held to
!e national, despite the fact that in practice it is local in its
imposition and utili7ation.
Nustice ;itug points out that: "&he real property tax
has !een considered and held to !e a national, not a local tax
in Eeralco .ecurities %ndustrial 0orp v. 0BAA, 11C .0)A
3?<. &he 0ourt said that realty tax has always !een imposed
!y the national law-ma4ing !ody. &he real estate tax is
enforced throughout the *hilippines and not in a particular
political su!division, although the !ul4 of the tax proceeds
accrue to the various local government units where the
property is located. Under the =ocal Kovernment 0ode, local
government units are mandated to fix a uniform rate of !asic
real property tax applica!le to their respective localities, the
proceeds of which exclusively accrue to them. (.ee .ecs. 355
and 3>1, =K0+#, W*age C>@, &ax =aw and Nurisprudence, 3<<<
-dition !y Nustice ;itug and Nudge AcostaX.
C&ARACTERISTIC OF REA4 (RO(ERT< TAX:
1. /irect tax on the ownership of real property
3. Ad ;alorem tax. &he value is !ased on the tax !ase
5. *roportion - the tax is calculated on the !asis of a
certain percentage of the value assessed
C. %ndivisi!le single o!ligation
9. =ocal &ax
C F'nda:en"a2 (rin+i)2es %o.ernin3 A))raisa2 and
Assess:en" of Rea2 (ro)er"/ 6Se+"ion 198C 4%C-
1. )eal property shall !e appraised at its
current and fair marAet #alue.
3. )eal property shall !e classified for
assessment purposes on the !asis of its actual
use.
5. )eal property shall !e assessed on the !asis
of a uniform standard within each local
government unit.
C. &he appraisal, assessment, and collection of
real property tax shall not be let to an*
pri#ate person and
9. &he appraisal and assessment of real
property shall be equitable.
! (ro)er"ies Co.ered 6Se+ 2;2C 4%C-
1. =and,
3. Buildings
5. Eachinery and
C. 1ther improvements not otherwise
exempted under said code (.ec 353, =K0+
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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Ma+#iner/ H em!races machines, e$uipment,
mechanical contrivances, instruments, appliances or
apparatus which ma* or ma* not be attached,
permanentl* or temporaril*, to the real propert*. %t
includes the physical facilities for production, the
installations and appurtenant service facilities, those
which are mo!ile, selfpowered or self-propelled, and
those not permanentl* attached to the real propert*
+hich are actuall*, directl*, and exclusi#el* used to
meet the needs of the particular industry, !usiness or
activity and which !y their very nature and purpose
are designed for, or necessary to its manufacturing,
mining, logging, commercial, industrial or
agricultural purposes. 6Se+ 199 RoSC 4%C-
Eachinery which are of 3enera2 )'r)ose 'se
including !ut not limited to office e$uipment,
typewriters, telephone e$uipment, !rea4a!le or easily
damaged containers (glass or cartons+,
microcomputers, facsimile machines, telex machine,
cash dispensers, furnitures and fixtures, free7ers,
refrigerators, display cases or rac4s, fruit 'uice or
!everage automatic dispensing machines 5#i+# are
no" dire+"2/ and ex+2'si.e2/ 'sed "o :ee" "#e needs
of a particular industry, !usiness or activity s#a22 no"
0e +onsidered 5i"#in "#e defini"ion of :a+#iner/
6Se+ 290 RoSC IRR of RA A1@0-
&mprovements include valua!le additions made to a
property or an amelioration in its condition,
amounting to more than a mere repair or replacement
of parts involving capital expenditures and la!or,
which is intended to enhance its value, !eauty or
utility or to adopt it for new or further purposes.
No"e, Althou2h the term real propert* has not been
expressl* defined in the "8/, earl* decisions of the
Supreme /ourt in Mindanao Bus /o. # /it* Assessor of
/a2a*an de Bro, $ S/RA C761 Board of Assessment
Appeals # Meralco, ))7 PDI" &-51 Manila 0lectric /o. #
Board of Assessment Appeals,)9 S/RA $5( seem to su22est
that Art. %)' of the /i#il /ode could also be controllin2,
to +it.
"Art. C19. &he following are immova!le property:
(1+ =and, !uildings, roads and constructions of all
4inds adhered to the soil
(3+ &rees, plants, and growing fruits, while they are
attached to the land or form an integral part of an
immova!le
(5+ -verything attached to an immova!le in a fixed
manner, in such a way that it cannot !e separated
therefrom without !rea4ing the material or
deterioration of the o!'ect
(C+ .tatues, reliefs, paintings or other o!'ects for use
or ornamentation, placed in !uildings or on lands !y
the owner of the immova!le in such a manner that it
reveals the intention to attach them permanently to
the tenements
(9+ Eachinery, receptacles, instruments or
implements intended !y the owner of the tenement
for an industry or wor4s which may !e carried on in a
!uilding or on a piece of land, and which tend
directly to meet the needs of the said industry or
wor4s
(?+ Animal houses, pigeon-houses, !eehives, fish
ponds or !reeding places of similar nature, in case
their owner has placed them or preserves them with
the intention to have them permanently attached to
the land, and forming a permanent part of it the
animals in these places are included
(>+ ,ertili7er actually used on a piece of land
(8+ Eines, $uarries, and slag dumps, while the matter
thereof forms part of the !ed, and waters either
running or stagnant
(@+ /oc4s and structures which, though floating, are
intended !y their nature and o!'ect to remain at a
fixed place on a river, la4e, or coast
(1<+ 0ontracts for pu!lic wor4s, and servitudes and
other real rights over immova!le property. "
%n 0altex vs. 0BAA, Eay 51, 1@83:
Eachinery and e$uipment, consisting of
underground tan4s, elevated tan4s, water tan4s,
gasoline pumps, computing pumps, water pumps, car
washer, car and truc4 hoists, air compressors and
similar articles, installed !y 0altex (*hilippines+ %nc.
in its gasoline stations, located on leased land, have
!een held to !e real property su!'ect to the tax. (real
properties which have characteristics of permanency,
the lease is for a long period of time+
'(() *AR +,-T&ON! Under Article C19
of the 0ivil 0ode, in order for machinery and
e$uipment to !e considered real property, they
must !e placed !y the owner of the land and,
in addition, must tend to directly meet the
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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needs of the industry or wor4s carried on !y
the owner. 1il companies, such as 0altex and
.hell, install underground tan4s in the
gasoline stations located in land leased !y the
oil companies from others. Are those
underground tan4s, which were not placed
there !y the owner of the land !ut !y the
lessee, considered real property for purposes
of real property taxation under the =K0F
-,..-T" AN-#R /RO0 ,1 2A#
CNTR: Bes. &he underground tan4s
although installed !y the lessee, .hell and
0altex, are considered as real property for
purposes of the imposition of real property
taxes. %t is only for purposes of executing a
final 'udgment that these machinery and
e$uipment, installed !y the lessee on a leased
land, would not !e considered as real
property. But in the imposition of real
property tax, the underground tan4s are
taxa!le as necessary fixtures of the gasoline
station without which the gasoline station
would not !e operational. (0altex v. 0BAA,
11C .0)A 3@?+.
S(ECIA4 C4ASSES OF REA4 (RO(ERT< 6Se+ 21@C
4%C-
1. D1.*%&A=.
3. 0U=&U)A= and .0%-6&%,%0 purposes
5. owned and used !y =10A= IA&-)
/%.&)%0&.
C. K100s rendering essential pu!lic services
in the supply and distri!ution of water andLor
generation or transmission of electric power.
E (ro)er"ies Exe:)"
1 Se+"ion 2;=C 4%C
a. )eal property owned !y the )epu!lic of
the *hilippines or any of its political
su!divisions except when the !eneficial use thereof has
!een granted, for consideration
or otherwise, to a taxa!le person
- except: when !eneficial use
thereof is granted to a taxa!le person
- cases of E%AA and E0AA:
K100s are not automatically exempt from
real property tax, depending on its charter
giving it exemption
- charter enacted after =K0 so that
the exemption is not revo4ed
!. 0harita!le institutions, churches,
parsonages, or convents appurtenant
thereto, mos$ues, non profit or religious
cemeteries, and all lands, !uildings, and
improvements actually, directly and
exclusively used for religious,
charita!le, or educational purposes.
- traditional exemptees
c. All pieces of machinery and e$uipment
that are actually, directly, and exclusively
used !y local water districts, and
government 2 owned or controlled
corporations engaged in the supply and
distri!ution of water andLor generation and
transmission of electric power.
d. All real property owned !y duly
registered cooperatives as provided for
under )A ?@58, and
e. Eachinery and e$uipment used for
pollution control and environmental
protection.
2 Se+"ion 2;8C 4%C
Id2e 4ands Exe:)" Fro: Tax,
By reason of:
a. force ma'eure
!. civil distur!ance
c. natural calamity
d. any cause which
legallyLphysically prevents the owner of the
property or
person having legal interest therein from
improving,
utili7ing, or cultivating the same
1#a" Are Considered as Id2e 4ands, 3-ec. '45,
2.C6
1. A3ri+'2"'ra2 2ands 2 Eore than 1 hectare if more
than P of which remain uncultivated or unimproved !y the
owner of the property or person having legal interest therein.
No" Id2e 4ands,
Y Agricultural lands planted to permanent or
perennial crops with at least 9< trees to a hectare
Y =ands actually used for gra7ing purposes
3. Non-A3ri+'2"'ra2 4ands 2 Eore than 1,<<< s$.
m. in area if more than P of which remain uncultivated or
unimproved !y the owner of the property or person having
legal interest therein.
(roof of Tax Exe:)"ion,
-very person !y or for whom real property is
declared who shall claim the exemption shall file with the
provincial, city or municipal assessor within 5< days from date
of declaration of real property sufficient documentary
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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evidence in support of such claim !i.e. corporate charters,
title of o+nership,articles of incorporation, contracts,
affida#its, etc.(
; Cons"i"'"iona2 Exe:)"ions
- actually, directly, exclusively used for
religious, educational and charita!le
purposes are exempt from real property tax
Juery: &o where does the exemption attachF &o the
property or to the entityF
0ase: A owns a parcel of land, leased !y church.
Eay A claim exemption from )eal *roperty
&axationF Bes, exemption attaches on property as
long as exclusively used for religious purchases.
0ase: .chool - not su!'ect to )eal *roperty &ax if
directly used for educational purposes.
A. Das a mansion near the school where the
president of the school resides and where guests
may !e accommodated - incidental, president has
to live near school
B. 6ear the school is a hospital where
medical students are trained - incidental to
operation of the school (Derrera vs. 0BAA 2 use
as trainee students+
0. 6ear the school is a mens dorm, a
student center
2 exempt, incidental to operation of the school
/. 6ear the school is another school
!uilding with 3 floors used as classrooms while 3
floors are for commercial stores.
- incidental to operation of school (Bishop of
6eva .egovia 0ase 2 vegeta!le garden near
convent is incidental to convent operation+
- that part not used for educational purpose is
su!'ect to real property tax
- As to the land, pro-rate according to use, one-
half taxed pursuant to A!ra ;alley 0ollege 0ase
6ote:
&ncidental exemptions
promulgated prior to 1@8> 0onstitution 2 meant,
primarily used for the purposes even if not
solely.
0A.-.:
1. %n MIAA #. Paranaque, Eul* -9,
-99$, the 0ourt declared the Airport =ands
and Buildings of the Eanila %nternational
Airport Authority exempt from the real
estate tax imposed !y the 0ity of *araZa$ue.
&he 0ourt declared void all the real estate
tax assessments issued !y the 0ity of
*araZa$ue on the Airport =ands and
Buildings of the E%AA, except for the
portions that the E%AA has leased to private
parties. &he 0ourt !ased its ruling under
.ection 3(1<+ and (15+ of the %ntroductory
*rovisions of the Administrative 0ode,
which governs the legal relation and status
of government units, agencies and offices
within the entire government machinery,
under which E%AA is a government
instrumentality and not a government-owned
or controlled corporation. Under .ection
155(o+ of the =ocal Kovernment 0ode,
E%AA as a government instrumentality is
not a taxa!le person !ecause it is not su!'ect
to UWtXaxes, fees or charges of any 4indU !y
local governments. &he only exception is
when E%AA leases its real property to a
Utaxa!le personU as provided in .ection
35C(a+ of the =ocal Kovernment 0ode, in
which case the specific real property leased
!ecomes su!'ect to real estate tax. &hus,
only portions of the Airport =ands and
Buildings leased to taxa!le persons li4e
private parties are su!'ect to real estate tax
!y the 0ity of *araZa$ue.
Under Article C3< of the 0ivil
0ode, the Airport =ands and Buildings of
E%AA, !eing devoted to pu!lic use, are
properties of pu!lic dominion and thus
owned !y the .tate or the )epu!lic of the
*hilippines. Article C3< specifically
mentions Uports x x x constructed !y the
.tate,U which includes pu!lic airports and
seaports, as properties of pu!lic dominion
and owned !y the )epu!lic. As properties of
pu!lic dominion owned !y the )epu!lic,
there is no dou!t that the Airport =ands and
Buildings are expressly exempt from real
estate tax under .ection 35C(a+ of the =ocal
Kovernment 0ode.
,urthermore, the 0ourt made a distinction
!etween a K100 and an instrumentality.
&hus:
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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8o#ernment3o+ned or controlled
corporation refers to any agency organi7ed
as a stoc4 or non-stoc4 corporation, vested
with functions relating to pu!lic needs
whether governmental or proprietary in
nature, and owned !y the Kovernment
directly or through its instrumentalities
either wholly, or, where applica!le as in the
case of stoc4 corporations, to the extent of at
least fifty-one (91+ percent of its capital
stoc4: x x x
A government-owned or controlled
corporation must !e Uorgani7ed as a stoc4 or
non-stoc4 corporation.U E%AA is not
organi7ed as a stoc4 or non-stoc4
corporation. E%AA is not a stoc4
corporation !ecause it has no capital stoc4
divided into shares. E%AA has no
stoc4holders or voting shares.
E%AA is also not a non-stoc4 corporation
!ecause it has no mem!ers.
.ince E%AA is neither a stoc4 nor a non-
stoc4 corporation, E%AA does not $ualify as
a government-owned or controlled
corporation.
&hus, for an entity to !e considered as a
K100, it must either !e organi7ed as a
stoc4 or non-stoc4 corporation. &wo
re$uisites must concur !efore one may !e
classified as a stoc4 corporation, namely: (1+
that it has capital stoc4 divided into shares,
and (3+ that it is authori7ed to distri!ute
dividends and allotments of surplus and
profits to its stoc4holders. %f only one
re$uisite is present, it cannot !e properly
classified as a stoc4 corporation. As for non-
stoc4 corporations, they must have mem!ers
and must not distri!ute any part of their
income to said mem!ers.
3. %n "un2 /enter of the Philippines
#s. Fuezon /it*, Eune -7, -99%, the 0ourt
held that =ung 0enter of the *hilipines, a
charita!le institution does not lose its
character as such and its exemption from
taxes simply !ecause it derives income from
paying patients, whether out-patient, or
confined in the hospital, or receives
su!sidies from the government, so long as
the money received is devoted or used
altogether to the charita!le o!'ect which it is
intended to achieve and no money inures to
the private !enefit of the persons managing
or operating the institution. Dowever, those
portions of its real property that are leased to
private entities are not exempt from real
property taxes as these are not actually,
directly and exclusively used for charita!le
purposes.
"Under the 1@>5 and 1@8>
0onstitutions and )ep. Act 6o. >1?< in
order to !e entitled to the exemption, the
petitioner is !urdened to prove, !y clear and
une$uivocal proof, that (a+ it is a charita!le
institution and (!+ its real properties are
ACT7A44<C !IRECT4< and
EXC47SI8E4< used for charita!le
purposes. U-xclusiveU is defined as
possessed and en'oyed to the exclusion of
others de!arred from participation or
en'oyment and UexclusivelyU is defined, Uin
a manner to exclude as en'oying a privilege
exclusively.U %f real property is used for one
or more commercial purposes, it is not
exclusively used for the exempted purposes
!ut is su!'ect to taxation. &he words
Udominant useU or Uprincipal useU cannot !e
su!stituted for the words Uused exclusivelyU
without doing violence to the 0onstitutions
and the law. .olely is synonymous with
exclusively.
Ihat is meant !y actual, direct and
exclusive use of the property for charita!le
purposes is the direct and immediate and
actual application of the property itself to
the purposes for which the charita!le
institution is organi7ed. %t is not the use of
the income from the real property that is
determinative of whether the property is
used for tax-exempt purposes.
&he petitioner failed to discharge
its !urden to prove that the entirety of its
real property is actually, directly and
exclusively used for charita!le purposes.
Ihile portions of the hospital are used for
the treatment of patients and the
dispensation of medical services to them,
whether paying or non-paying, other
portions thereof are !eing leased to private
individuals for their clinics and a canteen.
,urther, a portion of the land is !eing leased
to a private individual for her !usiness
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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enterprise under the !usiness name
U-lliptical 1rchids and Karden 0enter.U
Accordingly, the 0ourt held that
the portions of the land leased to private
entities as well as those parts of the hospital
leased to private individuals are not exempt
from such taxes. 1n the other hand, the
portions of the land occupied !y the hospital
and portions of the hospital used for its
patients, whether paying or non-paying, are
exempt from real property taxes.#
Analysis:
%s =ung 0enter lia!le for )eal *roperty &axF
Bes.
a. exclusively used means solely
used for charita!le purposes
!. exemption in its charter
revo4ed !y new =K0
c. incidental exemption no longer
recogni7ed
d. taxed on orchidarium, canteen,
private clinics
Juery: are the older cases now not
applica!le so that they are now
taxa!leF
- not clear as to the extent
of =ung 0enter case as to
areas which used to !e
considered as real
property tax exempted as
incidental
- %f city decides to tax .=U
on its hospital, par4ing lot,
etc., use as ground that
they should !e exempt due
to necessity, do not use the
word "incidental#
5. %n "RTA #s. /BAA, Bctober )-, -999,
though the creation of the =)&A was
impelled !y pu!lic service 2 to provide mass
transportation in EE- its operations
undenia!ly parta4es of ordinary !usiness. . .
Kiven that it is engage in a service-oriented
commercial endeavour, its carriage ways
and terminal stations are patrimonial
property su!'ect to tax, notwithstanding its
claim of !eing a K100.
Under its charter, =)& is not
exempt from real property tax. &axation is
the rule and exemption is the exception.
C. %n GI8IT0" #s. Pro#ince of Pan2asinan,
<ebruar* -&, -996, the 0ourt ruled that in
view of the une$uivocal intent of 0ongress
to exempt from real property tax those real
properties actually, directly and exclusively
used !y petitioner /%K%&-= in the pursuit of
its franchise, respondent *rovince of
*angasinan can only levy real property tax
on the remaining real properties of the
grantee located within its territorial
'urisdiction not part of the a!ove-stated
classification. .aid exemption, however,
merely applies from the time of the
effectivity of petitioner /%K%&-=s
legislative franchise and not a moment
sooner.
9. %n Philippine <isheries Ge#elopment
Authorit* #s. /ourt of Appeals, Eul* &),
-996, the 0ourt reversed the 0ourt of
Appeals decision which held that petitioner
*hilippine ,isheries /evelopment Authority
is lia!le to pay real property taxes on the
land and !uildings of the %loilo ,ishing *ort
0omplex which are owned !y the )epu!lic
of the *hilippines !ut operated and governed
!y the Authority.
&he 0ourt ruled that the Authority
is not a K100 !ut an instrumentality of the
national government which is generally
exempt from payment of real property tax.
Dowever, said exemption does not apply to
the portions of the %,*0 which the Authority
leased to private entities. Iith respect to
these properties, the Authority is lia!le to
pay real property tax.
&he Authority should !e classified
as an instrumentality of the national
government. As such, it is generally exempt
from payment of real property tax, except
those portions which have !een leased to
private entities.
F Ma/ 4%7s 3ran" exe:)"ionD <es
(o5er "o %ran" 4o+a2 Exe:)"ions 6Se+ 192 4%C-
- =KUs, may through ordinances duly approved, grant tax
exemptions, incentives or reliefs under such terms and
conditions, as they may deem necessary.
- Although powerless to grant )*& exemption, =KU in EE
can exempt the 9: ad valorem
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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tax on idle lands.
- =KUs (within and outside EE+ may also grant condonation
which actually parta4e of
exemption.
% 1#o are 2ia02e for "#e Rea2 (ro)er"/ Taxes
1. 1wnership vs. Use
/octrine of 1wnership
- owner is lia!le
/octrine of Use
- property is exempt due to Use
()-0-religious, educational,
charita!le+
Actual Use of *roperty as Basis for
Assessment !Sec. -)6, "8/(
)eal property shall !e classified, valued and
assessed on the !asis of actual use regardless of
where located, whoever owns it, and whoever uses it.
Beneficial User Eay Be =ia!le if:
M he leased property from the
government
M he leased property from an
exempt owner
M use is not exempt from real
property tax
3. %n &estate -state of 0oncordia =im vs. Eanila,
,e!ruary 31, 1@@<, K.%. foreclosed the property mortgaged
!y =im and for failure to redeem, owned !y K.%. for the
years 1@>> to 1@>8. %n 1@>@, heirs of =im repurchased
the property. Eanila sought to levy real property tax on
heirs for !ac4 taxes covering 1@>> and 1@>8.
Iho is li!le for the !ac4 taxesF
a. not the heirs !ecause they were not the owners nor
!eneficial owners at the time
!. not K.%. !ecause at the time it was exempt
c. !eneficial users or those using the property for
commercial use must pay however not
made lia!le since not impleaded

& (ro+ed're in Rea2 (ro)er"/ Taxa"ion
%n "opez #s. /it* of Manila, <ebruar* )7, )777, the
0ourt discussed the steps to !e followed for the mandatory
conduct of Keneral )evision of )eal *roperty assessments,
pursuant to the provision of .ec. 31@, of ).A. 6o. >1?< which
are as follows:
1. &he preparation of .chedule of ,air Ear4et
;alues.
3. &he enactment of 1rdinances:
a+ levying an annual Uad valoremU tax on
real property and an additional tax accruing to the
.-,.
!+ fixing the assessment levels to !e applied
to the mar4et values of real
properties
c+ providing necessary appropriation to
defray expenses incident to general revision of real
property assessments and
d+ adopting the .chedule of ,air Ear4et
;alues prepared !y the assessors.

&he preparation of fair mar4et values as a preliminary step in
the conduct of general revision was set forth in .ection 313 of
).A. >1?<, to wit: (1+ &he city or municipal assessor shall
prepare a schedule of fair mar4et values for the different
classes of real property situated in their respective =ocal
Kovernment Units for the enactment of an ordinance !y the
sanggunian concerned. (3+ &he schedule of fair mar4et values
shall !e pu!lished in a newspaper of general circulation in the
province, city or municipality concerned or the posting in the
provincial capitol or other places as re$uired !y law.
&he 0ourt also laid down the procedure in computing
the real property tax. Iith the introduction of assessment
levels, tax rates could !e maintained, although tax payments
can !e made either higher or lower depending on their
percentage (assessment level+ applied to the fair mar4et value
of property to derive its assessed #alue which is su!'ect to tax.
Eoreover, classes and values of real properties can !e given
proper consideration, li4e assigning lower assessment levels to
residential properties and higher levels to properties used in
!usiness. &he procedural steps in computing the real property
tax are as follows:
1+ Ascertain the assessment le#el of the property
3+ Eultiply the mar4et value !y the applica!le
assessment level of the property
5+ ,ind the tax rate which corresponds to the class
(use+ of the property and multiply the assessed value !y
the applica!le tax rates.
&he computation of real property tax is cited !elow:
Ear4et ;alue
* x x x
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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Eultiplied !y Assessment =evel (x :+
Assessed ;alue * x x x
Eultiplied !y )ate of &ax (x :+
)eal *roperty &ax
* x x
1. /eclaration of )eal *roperties 2 whose dutyF
!EC4ARATION OF REA4 (RO(ERT<
%t shall !e the responsi!ility of the owner,
administrator or their representatives to
declare, under oath, the true value of real
property, taxa!le or exempt, within ?< days
after the ac$uisition. &he sworn declaration
shall !e filed once every 5 years !efore Nune
5<
th
of the year commencing 1@@3. &he
failure or refusal to ma4e that declaration
within the prescri!ed period would authori7e
the provincial or city assessor to declare the
property in the name of the defaulting owner,
if 4nown, or against an un4nown owner as the
case may !e, and to assess the property for
taxation. (.ecs. 3<1-3<C =K0+.
%n the case of Testate state of Concordia 2im 7.
City of 0anila, ,e!ruary 31, 1@@<, it was held that the
unpaid tax attaches to the property and is chargea!le against
the person who had actual or !eneficial use and
possession of it regardless of whether or not he is the
owner. &o impose the real property tax on the su!se$uent
owner who was neither the owner nor the !eneficial user of
the property during the designated periods would not only
!e contrary to law !ut also un'ust.
a O5ner or Ad:inis"ra"or 6Se+s 202-20;C 4%C-
1#en, once every 5 years during the
period from Nanuary 1 to Nune 5<
1#a", file a sworn declaration with the
assessor with description of the
property
Y %, newly ac$uired property -
a. files with assessor within ?< /AB. from
date of transfer a
!. .I1)6 statement containing ,E; and
description of property
Y %, improvement on real property
a. file wLin ?< /AB. upon completion or
occupation (whichever is earlier+
!. .I1)6 statement containing ,E; and
description of property
0 (ro.in+ia2 $ Ci"/ $ M'ni+i)a2 Assessor
(.ec. 3<C+
1&EN only when the person under .ec 3<3 refuses
or fails to ma4e the declaration
within the prescri!ed time. 6o oath !y assessor is re$uired
[ NOT, IF FI4IN% FOR EXEM(TION (.ec.
3<?+
1&AT person claiming exemptions must file with
assessor sufficient documentary
evidence to support claim
1&EN within 5< days from the date of
/-0=A)A&%16 of property
[ IF re$uired evidence is not su!mittedwithin 5<
days, the property will !e listed as taxa!le in the roll
[ IF proven to !e tax-exempt, property will !e
dropped from the roll
[ NOT, IF (RO(ERT< !EC4ARE! FOR T&E
FIRST TIME (.ec. 333+
%f declared for 1st time, real property shall !e
assessed for !ac4 taxes
a+ for not more than ten (1<+ years prior to
the date of initial assessment
!+ taxes shall !e computed on the !asis of
applica!le schedule of values in force during the
corresponding periods
MAssessor will compare the entry on file with the
)egistry of /eeds and the assessment roll in his office.
+ 0'i2din3 offi+ia2s
*rior to construction of !uilding, as re$uired in
procuring !uilding permit.
*ermit transmitted !y !uilding officials to )egistry of
/eeds.
d %eode"i+ en3ineers - ,or lands surveyed
e No"aries ('02i+ - ,or document notari7ation, must
furnish the assessors a copy
3. ;aluation !y Assessors
Assessment
- the act or process of determining the value of a property, or
proportion thereof su!'ect to tax, including the discovery,
listing, classification, and appraisal of properties.
Appraisal
- the act or process of determining the value of property as of a
specific date for a specific purpose.

Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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4ISTIN% OF REA4 (RO(ERT< IN T&E
ASSESSMENT RO44S
(.ecs. 3<9, 3<>+
Y =isting of all )eal *roperty whether taxa!le or exempt
within the 'urisdiction of =KU in the assessment roll.
o 7ndi.ided rea2 )ro)er"/ 2 in the name of the estate or heirs
or devisees
o Cor)ora"ionC )ar"ners#i) and asso+ia"ion 2 same as
individuals
o O5ned 0/ "#e Re)'02i+ of "#e (#i2i))inesC i"s
ins"r':en"a2i"iesC )o2i"i+a2 s'0di.isionsC 0enefi+ia2 'se is
"ransferred "o a "axa02e )erson 2 in the name of the
possessor
Y All declarations shall !e 4ept and filed under a uniform
classification system to !e esta!lished !y the provincial, city
or municipal assessor.
.teps in assessment of )eal *roperty :
1. =isting of all properties su!'ect to the tax and
3. &he valuation of such properties.
%n /allanta #s. Bmbudsman, Eanuar* &9, )775,
where the issue was whether officials and employees of the
1ffice of the 0ity Assessor may reduce the new assessed
values of real properties upon re$uests of the affected property
owners, the 0ourt ruled that forestall the practice of initially
setting unreasona!ly high reassessment values only to
eventually change them to unreasona!ly lower values upon
Ure$uestsU of property owners, the law gives no such authority
to the city assessor or his su!alterns.. . &hus, petitionersT
unauthori7ed reduction of the assessed values inelucta!ly
resulted in the local governmentTs deprivation of the
corresponding revenues. =ost or reduced revenues undenia!ly
translate into damages or in'ury within the contemplation of
the law. &he city government of 0e!u, therefore, had every
legal right to feel aggrieved and to institute the proceeding
against petitioners.
5. *reparation of .chedule of ,air Ear4et ;alues
A((RAISA4 AN! 8A47ATION OF REA4
(RO(ERT<
(.ec 313-31C, 33C-339+
&o5 "o de"er:ine Fair MarBe" 8a2'e,
For 4and
1. Assessor of the provinceLcity or municipality may summon
the owners of the properties to !e affected and may ta4e
depositions concerning the property, its ownership amount,
nature and value. (sec. 315,=K0+
3. Assessor prepares a schedule of ,E; for different classes
of properties.
5. .anggunian enacts an ordinance.
C. &he schedule of ,E; is pu!lished in a newspaper of
general circulation in the province city or municipality
concerned or in the a!sence thereof shall !e posted in the
provincial capitol city or municipal hall places therein (.ec.
313, =K0+
C2assifi+a"ion of 4and for )'r)oses of assess:en" - Se+
218C 4%C
1. 0ommercial 2 land devoted principally for the o!'ect of
profit and is not classified as agricultural, industrial,
mineral, tim!er, or residential land
3. Agricultural 2 land devoted principally to the planting of
trees, raising of crops, livestoc4 and poultry, dairying, salt
ma4ing, inland fishing and similar a$uacultural
activities, and other agricultural activities
5. )esidential 2 land principally devoted to ha!itation
C.Eineral- lands which minerals, metallic or non-metallic,
exist in sufficient $uantity or grade to 'ustify the
necessary expenditures to extract and utili7e such materials
9. %ndustrial-land devoted principally to industrial activity as
capital investment and is not classified as agricultural,
commercial, tim!er, mineral or residential land
?. &im!erland
>. .pecial
- 0lassification of lands made !y respective sanggunian in
accordance with 7oning ordinances.
-%t is !ased on actual use. Actual use refers to the purpose for
which the property is principally or predominantly
utili7ed !y the person in possession thereof.
For Ma+#iner/
1. ,or Brand 6ew machinery : ,E; is ac$uisition cost
3. %n all other cases:
,E; G )emaining economic life x )eplacement cost
!ETERMINE ASSESSE! 8A47E (.ec. 318+
(ro+ed're
1. ta4e the schedule of ,E; (,air Ear4et ;alue+
3. Assessed value G ,E; x Assessment level
5. )eal *roperty &ax G Assessed value x Allowa!le )eal
*roperty &ax rate
C.-nactment of a )eal *roperty &ax 1rdinance
Barangays cannot impose realty taxes.
Eunicipalities cannot fix real estate tax rates.
Procedure
a.hearing and modification of prepared schedule
!.pu!lication
c.adoption of the schedule
d.adoption of real property ordinance with
assessment levels
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
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/o#era2e ? T*pes of Real Propert* Tax
1. Basic real property tax L Annual Ad ;alorem &ax
,or real property not specifically exempted
a.*rovinces 2 not more than 1: of assessed value
!.0ities, Eunicipalities in EE 2 not more than 3:
of assessed value
3. .pecial levies:
a. .pecial -ducation ,und (.-,+
- 1: additional real estate tax to finance the .-,
!Sec.-&$( 2 within EE area only
!. Additional Ad ;alorem on the =ands
2 not exceeding 9: of the assessed value of the
property !Sec. -&$, "8/(
c. .pecial AssessmentsL ,or *u!lic Ior4s
- on lands specially !enefited !y pu!lic wor4s,
pro'ects or improvements funded !y the =KU
- Eay !e imposed even !y municipalities outside
EE provided:
- .pecial levy shall not exceed ?<: of the
actual cost of such pro'ects and improvements, including the
costs of ac$uiring land and such other real property in
connection therewith not apply to lands exempt from !asic
real property tax and the remainder of the land have !een
donated to the local government unit concerned for the
construction of said pro'ects. !Sec. -%9, "8/(.
S)e+ia2 4e./
)e$uirements for validity:
1. infrastructure pro'ect financed !y government
where!y real property owners !enefit from it
3. not more than ?<: of actual cost of pro'ect
5. not less than five !ut not more than ten years
C. thru an ordinance
a. nature of pro'ect
!. extent of pro'ect
c. cost spent
d. metes and !ounds
.hat ma* be done
i. levy ad valorem taxes (see a!ove+
ii. ,ix Assessment levels
Assessment level 2 is the percentage applied to the
fair mar4et value to determine the taxa!le or taxation value
of the property.
%n /it* Assessor of /ebu /it* #s. Association of
Bene#ola de /ebu, Eune 5, -996, applying .ecs. 319-31?, of
=K0, in line with 0ity &ax 1rdinance =AA of 0e!u 0ity, the
1<: special assessment should !e imposed for the 0hong Dua
Dospital Eedical Arts 0enter (0DDEA0+ !uilding which
should !e classified as "special#. .ec. 31?, =K0 states that:
.-0. 31?. Special /lasses of Real
Propert*.22All lands, !uildings, and
other improvements thereon actually,
directly and exclusively used for
hospitals, cultural or scientific
purposes, and those owned and used
!y local water districts, and
government-owned or controlled
corporations rendering essential
pu!lic services in the supply and
distri!ution of water andLor
generation and transmission of
electric power shall !e classified as
special.
iii. *rovide for appropriations
iv. Adopt .chedule of ,air Ear4et ;alues
,air Ear4et ;alue and Assessed ;alue 2 Ihats the
differenceF
,air Ear4et ;alue (,E;+
- price at which a property may !e sold !y a
seller who is not compelled to sell and !ought !y a
!uyer who is not compelled to !uy
Assessed ;alue or Assessment ;alue (A;+
- fair mar4et value of the real property
multiplied !y the assessment level. %t is synonymous
with taxa!le value.
(a/:en" of Tax
1#en, Nanuary 1 of every year (.ec 3C?+
&he tax shall constitute as superior lien (.ec. 3C?+
&o5,
a. !asic real prop tax in C e$ual installments (Ear 51,Nun
5<,.ep 5<, /ec 51+
!. special levy - governed !y ordinance
In"eres" for 4a"e (a/:en"
- two percent (2Q+ ea+# :on"# on unpaid amount until the
delin$uent amt is paid.
- provided in no +ase shall the total interest ex+eed "#ir"/-six
6;@- :on"#s
Ad.an+e and (ro:)" (a/:en"
a+ advance payment - discount not exceeding 3<: of annual
tax (.ec 391, =K0+
!+ prompt payment - discount not exceeding 1<: of annual
tax due(Art 5C3 %))+
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#
B A
R C
O
M 2
0 0 8
- 0 9
REVIEW NOTES FOR TAXATION 2 9C
Co22e+"ion of Tax (.ec.3C>, =K0+
&he collection of the real property tax with interest
thereon and related expenses and the enforcement of the
remedies provided !y the =K0 or any applica!le laws shall !e
the responsi!ility of the city or municipal treasurer concerned.
&he city or municipal treasurer my deputi7e the
!arangay treasurer to collect all taxes on real property located
in the !arangay provided the !arangay treasurer is properly
!onded.
1#o Co22e+"s,
&he provincial, city, municipal or !arangay treasurer
(eriod 1i"#in 1#i+# To Co22e+" 6Se+ 2A0-,
Iithin five (9+ yrs from the date they !ecome due within ten
(1<+ yrs. from discovery of fraud, in case there is fraud or
intent to evade
(eriod of )res+ri)"ion s#a22 0e S7S(EN!E! 5#en, 6Se+
2A0C 4%C-
1. local treasurer is 2e3a22/ )re.en"ed to collect tax
3. the owner of prop re$uests for rein.es"i3a"ion and writes a
5ai.er !efore expiration of period to collect
5. the owner of the property is o'" of "#e +o'n"r/ or +anno"
0e 2o+a"ed
Prepared by TAX LAW COMMITTEE Adviser: Atty !as"# $ar%is&
2''( C)air*a#: +e#evieve S)"#t",a#& VC)air*a#: S-ar%et $a#a."%& Me*bers: /risti#e $eas& Marie Mae $0%iyat& Wi%)e%*i#a 1i.a& Fe%i2a /adatar&
C)ar%e#e La,0a& C%ary%% A##e La*i#at"& S)a#dra 1ia#e Mappa#,
2''3 C)air*a#: N"r.ay#e Sa%*a#& VC)air*a#: Car%" Ri*as& Me*bers: S)ay#e A## $as-"& L"ta Marie $0a#& Marie Mae $0%iyat& Pre-i"0s Madi"&
!e44ers"# Ma%a-as& /are# M"ster& C%are#-e Ri*a#d"& +e#evieve S)"#t",a#